What is a winding up petition?

A winding-up petition is an important aspect of debt recovery in England and Wales. It is a legal action taken by a creditor to force a company into compulsory liquidation. This process is governed by the Insolvency Act 1986.

A winding-up petition is typically filed by a creditor who is owed a significant amount of money by a company. The debt must be undisputed, and the company must have failed to pay it. Winding up proceedings often follow the issuance of a statutory demand.

The creditor should apply to the court by filing a winding-up petition with the appropriate court fees. This is a formal legal document requesting the court to order the compulsory liquidation of the company.

After the petition is filed with the court, it must be served on the company. This is a crucial step, as the company needs to be aware of the legal proceedings against it.

Once a winding up petition has been issued, the company must notify Companies House of the petition. This is usually done by filing form “IN01 – Notice of Application for Court Order.”

The petition is then advertised in the London Gazette, an official public record. This publicises the fact that a winding-up petition has been filed against the company.

A court hearing is scheduled where the petition will be heard. If the court is satisfied that the company is unable to pay its debts and that it is just and equitable to wind up the company, it may issue a winding-up order.

If a winding-up order is granted, an official receiver or an insolvency practitioner is appointed as the liquidator. The company’s assets are sold, and the proceeds are used to pay off its debts. The company’s bank accounts will also be liquidated.

Challenging a winding up petition

A company has the right to challenge a winding-up petition that has been filed against it. Challenging a winding-up petition involves presenting a defence to the court, and the company may do so on various grounds. Detailed below are some common reasons a company might challenge a winding-up petition:

Dispute of debt: If the company disputes the debt claimed by the petitioner and believes it is not owed or is inaccurately calculated, this can be a valid defence. The court may dismiss the petition if there is a genuine dispute about the debt.

Defects in the petition: The company may challenge the winding-up petition if there are procedural defects or errors in the way the petition was prepared or served. Common defects include incorrect details or failure to follow the prescribed legal requirements.

Proposal for a Company Voluntary Arrangement (CVA): If the company can demonstrate a credible proposal for a Company Voluntary Arrangement (CVA) or a creditors voluntary liquidation, the court may consider this as a valid reason to adjourn or dismiss the petition.

Payment of debt: If the company settles the debt claimed in the winding-up petition before the court hearing, it may be possible to have the petition withdrawn. However, this typically requires prompt and full payment of the debt, including any legal costs incurred by the petitioner.

Other valid defences: In certain circumstances, a company might challenge a winding-up petition based on other valid legal defences. For example, if the company can demonstrate that it is solvent and able to pay its debts.

Winding up petition costs

The costs involved in winding-up petition proceedings can vary depending on several factors.

• Legal fees: If the company seeks legal representation to defend against the winding-up petition or navigate the liquidation process, legal fees will be a significant cost. The complexity of the case and the level of legal support required can impact these fees.
• Court fees: Filing a winding-up petition involves payment of court fees. The exact amount varies and depends on factors such as the value of the debt claimed and the stage of the proceedings.
• Insolvency practitioner fees: If an insolvency practitioner is appointed as a liquidator, their fees for overseeing the liquidation process will be part of the costs. These fees are typically drawn from the assets of the company.
• Process server fees: A process server is an individual or a professional service hired to deliver legal documents, including the winding-up petition, to the company being petitioned.
• Official Receiver’s fees: If the Official Receiver becomes the liquidator, they may charge fees for their services, which are also covered by the assets of the company.
• Advertising Costs: The requirement to advertise the winding-up petition in the London Gazette incurs additional costs. This is a legal requirement to notify the public and creditors about the petition.
• Other Professional Fees: Additional professional services, such as forensic accountants or other specialists, may be engaged during the proceedings, incurring extra costs.
• Travel and Disbursements: Travel expenses, as well as other disbursements associated with the proceedings, may be incurred.
• Creditors’ Meeting Costs: If a creditors’ meeting is convened during the liquidation process, there may be associated costs, such as venue hire and administrative expenses. 

Typically, in legal proceedings, including winding-up petitions, the general rule is that the unsuccessful party may be ordered to pay the costs of the successful party. However, the court has discretion in awarding costs, and various factors are taken into consideration.

If the court finds that the winding-up petition was brought without proper cause or in bad faith, it may order the petitioner to pay the costs incurred by the respondent company. On the other hand, if the court determines that the petition was justified and necessary, the costs may be awarded in favour of the petitioning creditor.

How can ARC Costs assist?

ARC Costs can assist will all aspects of claiming or defending winding up petition costs.

ARC Costs are a team of independent and experienced Costs Draftsmen and Costs Lawyers who regularly assist you in the recovery/contention of costs.

Whether you are the Paying Party or the Receiving Party, we hold vast experience in dealing with costs matters on both sides.

We can assist in fixed recoverable costs cases and cases where costs are awarded on the standard basis, including the preparation/challenging of Bills of Costs, conducting of detailed assessment proceedings, and the preparation of Points of Dispute/Reply.

Should you require our assistance or have any further queries regarding costs, please contact us on 01204 397 302 or email one of the team at info@arccosts.co.uk. Alternatively, please complete our online enquiry form, and we will contact you to discuss your query or speak to our staff using the live chat function.

If you would like to issue or defend a winding up petition, ARC Costs also maintain an extensive legal network of expert Solicitors in this area, and we would be happy to pass on your details to assist.

We may receive payments from third party solicitors on our panel to whom we may refer your claim. We will never charge you for any referrals made to our panel of third parties.