Under the Act directors of a limited company with financial difficulties can:
• offer a voluntary arrangement
• apply to the court for an administration order
• call a creditors’ meeting to propose putting the company into voluntary liquidation
All of the above options lead to a qualified insolvency practitioner being appointed to supervise the arrangement. Within 28 days of being appointed the insolvency practitioner must submit a report outlining the company’s proposals for:
• settling its debts
• or a plan of reconstruction or sale
• or releasing the company’s assets by winding it up
Where a court makes an administration order allowing the insolvency practitioner to reconstruct the company or prepare it for sale, this order freezes any further legal action by creditors. Hire purchase or leasing companies are unable to enforce their securities, and they are not allowed to repossess equipment subject to those agreements.
Sections 123(i) and 123(i)(b) of the Insolvency Act 1986 stipulate that if a company is deemed unable to pay its debts, or a judgement order in favour of a creditor remains unsatisfied in whole or part, the company is insolvent, and a creditor may petition for the compulsory winding-up of the company.
Winding-up orders are made by the court as a result of a petition being presented by a creditor. The necessary forms are available from any law stationers, and a creditor must provide the following details:
• name and address of petitioning creditor
• name and registered office of the debtor
• date of debtor’s incorporation
• evidence of insolvency
The petition will be based on your statutory demand for payment, together with a sworn affidavit of service.
Having taken or presented the petition to the companies court it will be given a number, and a date and time for a hearing will be fixed. A copy of the petition will be sealed by the court for service on the debtor company. This document is served in the same manner as the statutory demand, and an affidavit of service will be required. The debtor’s company secretary has four days to swear an affidavit confirming the debt. If no affidavit is sworn no further evidence is required. Otherwise you must:
• advertise the petition in the London Gazette
• on the date determined by the court lodge papers upon the Registrar confirming the matter is in order for hearing
You as petitioner must show:
(a) the petition was advertised
(b) the affidavits of service had been filed.
Any person who intends appearing at the hearing must give notice to the petitioner, and state whether they will be supporting or opposing the petition. The hearing at which you will require legal representation will be held in open court, and it has the power to:
• adjourn the petition for more evidence
• order a scheme of arrangement
• making a winding-up order
On making a winding-up order the court must give notice to the Official Receiver, who takes possession of the company’s assets, discharges all employees, and dismisses the directors of the company.
In time the Official Receiver will call a meeting of all creditors. As a creditor of a company which is in the course of winding-up you will receive notice of the meeting, together with proof of debt and proxy forms. Both forms must be completed and returned to secure your debt and voting rights. If you are not the petitioning creditor evidence of your debt must accompany the forms — a copy invoice or finance agreement will suffice. All claims must be quoted excluding VAT. Bad debt relief is available from HM Customs and Excise.
You might also like:
There are two ways to creating a profitable busine...
With Tax Day on April 15th quickly approaching, ti...
by Patrick Hogan Running a business is challengin...