06/01/2025

A winding-up order is a court instruction to close down a company and liquidate its assets. It’s also known as compulsory liquidation.

A court can issue a winding-up order when a company is unable to pay its debts, the debt is valid and the company is insolvent.

A question which I am frequently asked when someone has an unsatisfied judgment (a court order that remains unpaid) is, is this a ground for presenting a winding-up order or bankruptcy petition and do I need first to have served a statutory demand?

An unsatisfied judgment can be grounds to present a winding-up order. However, the first thing to be aware of is that under the Insolvency Level for Companies, the judgment debt has to be in excess of £750 and for individuals in excess of £5000.

Secondly, there are a number of ways that a creditor can establish a company’s inability to pay its debts and these include a failure to satisfy in full a judgment debt where execution or other process issued on the judgment is returned unsatisfied in whole or in part. When relying on this (section 123 Insolvency Act 1986) it is not necessary to have served a statutory demand. There is a similar provision under section 268 of the Insolvency Act 1986 for personal insolvency.

In relation to personal insolvency, the judgment creditor will often have instructed a High Court Enforcement Officer who can make a proper return that his execution was ‘returned unsatisfied in whole or in part’ after serious attempts to levy execution.

Depending on the circumstances and the size of the unpaid judgment debt by reference to the company’s financial circumstances generally, the unpaid debt may in itself provide grounds for a petition.

Step-by-step guide to issuing a winding up petition:

Step one: Determine Eligibility

  • Debt Amount: The debt must be at least £750.
  • Debt Type: The debt must be undisputed and due for payment.
  • Preliminary Actions: Check if other options like a statutory demand, debt collection, or a county court judgment (CCJ) are more appropriate.

Step two: Serve a Statutory Demand (optional as explained above)

  • While not mandatory, serving a statutory demand is a common precursor as it demonstrates that the debtor cannot pay their debts.
  • If the company does not pay within 21 days of the demand, this can support your case.

Step three: Confirm Insolvency

  • Ensure there is evidence of the company’s insolvency, such as:
    • The company’s inability to pay the debt after a statutory demand.
    • An unsatisfied judgment against the company.
    • Admission of insolvency by the company.

Step four: Prepare the Winding-Up Petition

  • Complete Form Comp 1 (Winding-Up Petition).
  • Complete Form Comp 2 (Statement of Truth) confirming the facts of the debt and the company’s inability to pay.

Step five: File the Petition

  • File the petition at the nearest Business and Property Court that handles insolvency cases.
  • Pay the court fees and deposit.

Step six: Serve the Petition

  • Arrange for the petition to be personally served on the company at its registered office.
  • Service must occur at least 14 days before the hearing date.

Step seven: Advertise the Petition

  • Advertise the petition in The Gazette at least 7 business days after serving the petition and 7 business days before the hearing.
  • The purpose of advertising is to inform other creditors and allow them to join the petition if they wish.

Step eight: Attend the Hearing

  • The court will review the petition, evidence, and the company’s response.
  • Possible outcomes include:
    • Granting the winding-up order.
    • Dismissing or adjourning the petition (if the debt is disputed or other issues arise).
    • The company settling the debt before the hearing.

Step nine: Implement the Winding-Up Order

  • If granted, the Official Receiver or a licensed insolvency practitioner is appointed to liquidate the company’s assets.
  • The proceeds are used to pay creditors in the order of priority set by insolvency law.

Step ten: Notify Interested Parties

  • Notify stakeholders, including other creditors, banks, and relevant authorities, about the winding-up order.

Need advice on issuing a winding up order?

For advice on any debt recovery matter, please contact Head of Debt Recovery Richard Anderson for further information. You can email richard.anderson@beswicks.com or call us on 01782 205000 or 0161 929 8494. Take a look at our services to find out more about how we can help you.