Overview Of Does A Winding Up Petition Require A Deposit
The answer to the question does a Winding Up Petition require a deposit is yes it does.
If a creditor is owed money by an insolvent company that is not itself taking steps to be wound up by going into Liquidation such as Creditors Voluntary Liquidation, then one of the key options for a creditor is to take its own action to wind it up. This is known as putting a company into Compulsory Liquidation.
The purpose of forcing a company into Liquidation would be to act as a way to obtain repayment of the debt due to the creditor. It would also enable control of the company to be taken out of the hands of the Directors who would lose their powers in light of Section 103 of the Insolvency Act 1986 were it to be wound up and the Liquidator could then realise the assets to be paid to creditors subject to the Statutory Order of Payment In Insolvency.
What Is A Winding Up Petition?
A Winding Up Petition is a document that is lodged with the Court to initiate the process of putting a company into Compulsory Liquidation by obtaining a Winding Up Order.
To apply to wind up a company in this way which owes a creditor money, they need to fill in form COMP 1 and confirm details of the petition in COMP 2.
What Is The Deposit For The Winding Up Petition?
To lodge the Winding Up Petition with the Court a deposit must be paid by the petitioning creditor.
As of September 2023, the deposit is £2,600 which is money used to contribute to the costs of the Official Receiver.
Who Is The Official Receiver?
The Official Receiver is a civil servant employed by the Insolvency Service which is a government agency of the Department of Business & Trade.
The Official Receiver is in effect the government Liquidator who has to wind up the company’s affairs and investigate the conduct of the Directors.
Alternatives To A Winding Up Petition And Compulsory Liquidation
It is possible for a Director to stop a Winding Up Petition and thereby avoid a Compulsory Liquidation if they act quickly enough. Instead of being pushed into it they can initiate an insolvency process themselves by placing the company instead into Creditors Voluntary Liquidation.
Alternatively, if the business could be saved through restructuring it might be possible to consider a Company Voluntary Arrangement, perhaps supported by a Moratorium as part of an Administration process.
