How do I prove to the High Court that the company which owes me money cannot pay its debts?
The High Court will regard a company as being unable to pay its debts if any of the following occur:
- a creditor who is owed more than £750 serves a 'statutory demand' (Form 4.01) for the money due and it is not paid or secured, or a settlement is not agreed, within 21 days. You can download the form for a statutory demand from the forms section of this website - the completed form must be served on the company at its registered office - the creditor must have proof of service, so it is usual to employ a process server (these are listed in Yellow Pages under 'detective agencies') - the High Court is not involved in issuing statutory demands, so no court fee is payable. However, the company can dispute the statutory demand and apply to the High Court for the statutory demand to be set aside or to restrain the petition (that is, stop a winding-up petition from being presented)
- a creditor obtains judgment against the company, it is lodged for enforcement with the Enforcement of Judgments Office at Bedford House, Bedford Street, Belfast, and a certificate of unenforceability is issued under Article 19 of the Judgments Enforcement (Northern Ireland) Order 1981
- it is proved to the High Court that the company cannot pay its debts when they fall due, for example, no payment in response to a letter of demand
- It is proved to the High Court that the company's total debts exceed its total assets
How do I put a company into compulsory liquidation?
If a company owes you money, you can only wind it up by presenting a petition to the High Court for the company to be wound up (compulsory winding up).
Compulsory winding up (compulsory liquidation) is when the High Court makes an order for the company to be wound up ('a winding-up order') on the petition of an appropriate person, usually a creditor. A winding-up petition is usually presented by a creditor on the grounds that the company cannot pay its debts, and this has to be proved in the Court.
In which Court should a winding-up petition be presented?
The winding-up petition should be presented in theNorthern Ireland High Court
Royal Courts of Justice
The telephone number is 028 9023 5111 and you should ask to be put through to the Bankruptcy and Chancery Office.
What is the procedure for presenting a winding-up petition?
To ensure that all legal requirements are met, it is usual to instruct a solicitor to deal with issuing a winding-up petition.
To present a winding-up petition you cannot just complete the petition and present it to the High Court. If there are legal proceedings, this can result in costs being awarded against either party. For example, costs could be awarded against a person presenting a winding-up petition if the Court believes that the winding-up procedure has been used in inappropriate circumstances where the debt is clearly defended.
Insolvency law requires that before the Court can hear the petition, affidavits must be lodged at Court verifying the winding-up petition. The petition must usually be served on the company at its registered office. An affidavit of service of the petition must be filed at Court and the petition must be advertised in the Belfast Gazette at least seven days after the petition is served on the company and at least seven days before the hearing. Further statements of truth may be required if, for example, you wish to withdraw the petition.
Process for presenting a petition
- you must pay a deposit to the Department for the Economy
- you must complete a winding-up petition (Form 4.02) along with an affidavit (Form 4.03), verifying the matters giving rise to the petition
- the petition is filed at court, along with sufficient copies to be served on the company and any other parties involved, and the relevant court fee and deposit - the court then fixes the place and date when the petition will be heard
- a copy of the petition (sealed by the court) must be served on the company at its registered office, or if this is not possible, at the company's last main place of business, or on a company director or company secretary - a copy must be sent to any voluntary liquidator, administrative receiver, administrator or supervisor of a voluntary arrangement appointed to the company. Immediately after service of the petition, the petitioner must file a affidavit at court, verifying the service of the petition (Form 4.04/4.05)
- no earlier than seven working days after the petition is served on the company, but at least seven working days before the hearing, the petitioner must advertise notice of the petition (Form 4.06) in the Belfast Gazette - this enables other interested parties to inform the petitioner that they wish to attend the hearing, and whether they wish to support or oppose the petition
- at least five days before the hearing, the petitioner must file at court a certificate of compliance with the rules relating to service and advertisement (Form 4.07), along with a copy of the advertisement in the Gazette
- if the company wishes to oppose the petition, it must file its affidavit in opposition at least seven days before the hearing
- on the day of the hearing, the petitioner must prepare a list, for the court, of the people appearing at the hearing (Form 4.10)
- at the hearing, the petitioner, creditors, the company and its shareholders all have the right to be heard, and the court may also choose to hear anyone with an interest in the company's property
The court can then either:
- dismiss the petition
- adjourn the hearing
- make a winding-up order
- make an interim order
- make any other order it thinks fit
All the forms are in the Insolvency Rules (Northern Ireland) 1991 and you may also be able to get them from legal stationers - see Yellow Pages.
What are the costs of putting the company into compulsory liquidation?
The fees you will have to pay are:
- petition deposit of £1,165 towards the costs of administration of the liquidation
- a court fee of £186
- the costs involved in advertising the petition in the Belfast Gazette, using a process server for the service of a statutory demand and the petition, etcetera
- any costs for instructing a solicitor
Can anyone appeal against or stop a winding-up order?
There are three ways that winding-up proceedings can be stopped:
- the Court can rescind (ie cancel) a winding-up order - the company (or anyone else) can apply for it to be rescinded if the Court did not have all the relevant facts when making the winding-up order - application should be made within seven days of the order being made.
- the company can appeal against a winding-up order - as a result of an appeal, the Court can rescind the winding-up order or otherwise vary its decision - an appeal should be made within four weeks of the order being made.
- liquidation proceedings can be 'stayed' (ie stopped), permanently or temporarily, on the application of the liquidator, the Official Receiver, a creditor or a shareholder - if liquidation proceedings are stayed permanently, the directors usually regain control of the company - an application to stay the liquidation proceedings can be made at any time after a winding-up order has been made
What happens after a company goes into compulsory liquidation?
Usually, the Official Receiver (who is both a civil servant in The Insolvency Service and an officer of the High Court) will be appointed liquidator of the company on the making of a winding-up order.
The Official Receiver has a duty to:
- to ensure that notice of the winding-up order is advertised in the Belfast Gazette and in a local newspaper
- to investigate the affairs of the company and to establish the cause of its failure (by obtaining information from the directors of the company and from third parties, such as the company's bankers, accountants and solicitors)
- as liquidator - to collect and realise all assets and pay all creditors
The Official Receiver may call a meeting of creditors to appoint an insolvency practitioner as liquidator in his place, but if this happens he still has a duty to investigate the company's affairs.
So, two people may be involved in the liquidation:
- the liquidator, who is responsible for collecting and realising the assets and paying the creditors
- the Official Receiver, who investigates the company's affairs
The Official Receiver also has a duty to make a report to the Department, under the Company Directors Disqualification (Northern Ireland) Order 2002, regarding the conduct of the company's directors.
What are the duties of a company director in compulsory liquidation proceedings?
In compulsory liquidation proceedings, the company's directors must:
- provide information about the company's affairs to the Official Receiver, probably initially over the telephone, but later at a formal interview at the Official Receiver's office
- provide information about the company's affairs to any insolvency practitioner who is appointed liquidator of the company, and attend for interview when reasonably required
- look after and hand over the company's assets to the liquidator or Official Receiver, together with all its books, records, bank statements, insurance policies and other papers relating to its assets and debts
When will compulsory liquidation end?
How long liquidation takes depends on the circumstances of the individual case (for example, the nature of the assets involved and the complexity of the liquidation), but once the process has been completed the company will be dissolved and cease to exist.