If you are a creditor of a limited company and your debt exceeds £750.00 then you may wish to consider issuing winding up proceedings against that company if they are unable to pay your debt.
A creditor’s winding up petition should only be considered for undisputed debts. If your debt is disputed or likely to be disputed in whole or in part, regardless of whether you think such a dispute has any merit, then it is advisable to first obtain a judgment against the company and then issue a winding up petition (see our Commercial Litigation section for more information). If you attempt to issue winding up proceedings against a debtor company in respect of a disputed debt then you face the risk of the debtor company making an application to the High Court to prevent the issue of a winding up petition. If the debtor company succeeds in such an application then it is likely that you will have to reimburse them the legal costs which they incurred in having to make such an application as well as having to discharge your own legal costs. This could easily run to several thousand pounds.
Whilst the financial threshold for a creditor’s winding up petition is for debts in excess of £750.00 we would normally advise creditors that a winding up petition should not be issued in respect of debts of less than circa £5,000.00. A creditor’s winding up petition is an expensive process and whilst the debtor company can be potentially liable for these costs, the primary responsibility for same will be the creditor who can then seek reimbursement from the debtor company at a later stage.
A petitioning creditor’s legal costs are normally recoverable from a debtor company once the petition has been both served and advertised without the debt being paid. If a petition is dismissed, which usually occurs if the debtor company discharges the petitioning creditor’s debt before the hearing, then a creditor should expect their legal costs to be in the region of £1,500.00. If the petition is not dismissed and the Court makes an order winding up the company then the petitioning creditor should expect their legal costs to be in the region of £2,500.00. A creditor should therefore only issue a winding up petition if they are prepared to wind the debtor company up and in doing so incur the significant costs associate with same.
A creditor’s winding up petition is normally commenced by issuing a statutory demand, which is essentially a formal demand requiring payment within 21 days, after which time a winding up petition can be presented. We have a vast experience in assisting creditors in issuing winding up proceedings against a debtor company and we have administrative procedures in place in our office which allow us to act on your instructions immediately and progress your case through to a hearing efficiently and without delay. If you are owed money by a limited company then please contact our insolvency department to discuss whether issuing a creditor’s winding up petition is an appropriate way for you to proceed.