News
2 April 2009
Issuing a winding up or bankruptcy petition (insolvency proceedings)
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If you are owed money by another business or individual and the debt is greater than £750, as a creditor you can issue a winding up or bankruptcy petition, also known as insolvency proceedings.
There are two main routes for a creditor, both have the same requirement which is “a genuine belief that the debtor is unable to meet their creditors claims as and when they fall due”. Insolvency processes must not be used where there is a known dispute or any indication of a possible dispute.
As a creditor, you can:
- take insolvency proceedings as a form of enforcement following the securing of a Court Judgment; or
- instigate insolvency proceedings using either a statutory demand or Section 123 (1)(e) Notice – You must be satisfied that there is no dispute over the outstanding debt.
To clarify the terminology: a winding up petition is issued to a company and a bankruptcy petition is used against an individual or partnership. In the case of a partnership, all the partners would be made bankrupt.
In our experience, the simple threat of winding up or bankruptcy can be a very effective means of obtaining outstanding payment in the right circumstances.
It is very important to take professional advice before embarking on this course of action as the law assumes that a statutory demand paves the way for a petition. If the demand does result in the issue of a petition (not an order for winding up) this can trigger a reaction from other creditors of the same business.
If you have any debts that are of particular concern, please call Iain Bould or Richard Preston in our insolvency and debt recovery team on 01782 205 000 to discuss how we can help you to obtain payment and improve your credit control procedures.
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.
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