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PRACTICE NOTES
Practice Note
This Practice Note sets out the applicable practice and procedure that applies to the winding up of a company (the debtor) pursuant to a creditors’ winding-up petition.
The most frequent circumstances in which such a petition is presented are as follows:
a creditor has served a statutory demand on the debtor and, after the 21-day period has lapsed, the company has not paid, secured, or compounded the amount due (see Practice Note: Company statutory demand)...
Restructuring & Insolvency
PRACTICE NOTES
The winding up of a company is treated as having begun on the day the winding-up petition is presented. While a prescribed template for a winding-up order no longer exists, the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024, r 7.20 — and, with altered provisions in r 7.32 where the winding up follows the termination of an administrator’s appointment or there is a company voluntary arrangement (CVA) supervisor — set out the following particulars that must appear:
the case identification details
the judge’s name and title issuing the order
the petitioner’s name and postal address
the petitioner’s capacity entitling them to present the petition (for example, the company, a creditor, or a regulator)
the date the petition was lodged
an order that the company be wound up by the court under the Insolvency Act 1986 (IA 1986)
a statement confirming whether the proceedings are COMI
Restructuring & Insolvency
PRACTICE NOTES
The procedure enabling an insolvent company to be voluntarily wound up is known as a creditors’ voluntary liquidation (CVL). In a CVL, the board initiates matters by convening a general meeting at which members decide on a resolution to place the company into liquidation. This route is commonly regarded as the alternative to a compulsory winding up by the court on a petition brought against the company, most often by a creditor, rather than through formal court proceedings...
Restructuring & Insolvency
PRACTICE NOTES
This Practice Note outlines the impact of a creditors’ voluntary liquidation (CVL) on:
the company
the company’s officers
the company’s members
the company’s employees
legal proceedings
The effect on the company
From the date the resolution to wind up is passed, the company must halt its business, except to the extent continuation is needed for a beneficial winding-up. However, the company’s corporate status and powers persist until dissolution, regardless of anything inconsistent in its articles. Consequently, in a voluntary liquidation the liquidator must act in the company’s name unless the Insolvency Act 1986 or the Insolvency (England and Wales) Rules 2016 (SI 2016/1024) specifically empower them to act personally. Shares in a company that has entered voluntary liquidation cannot be transferred without the liquidator’s sanction, and any change in the members’ status made after the
Restructuring & Insolvency
PRACTICE NOTES
Compulsory liquidation or winding up by the court Where the Official Receiver is appointed
When the court makes a winding-up order, the official receiver (OR) takes office as liquidator. After the OR has finished their enquiries and considers the winding up practically complete, they may lodge a notice with the registrar of companies confirming that the court winding up has been concluded. A winding up is treated as complete when the liquidator has taken the company’s affairs as far as possible towards closure. The company is dissolved three months after the registrar registers that notice. Under the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024, r 7.70, the OR must send creditors a notice of intention to dissolve before notifying the Secretary of State, under section 174(3) of the Insolvency Act 1986 (IA 1986), that the winding up is for
Restructuring & Insolvency
PRACTICE NOTES
The purpose of a statutory demand
The purpose of a statutory demand is to demonstrate that a company cannot pay its debts, rather than the creditor relying on section 123(1)(e) or section 123(2) of the Insolvency Act 1986 (IA 1986). A statutory demand is a written demand, in the prescribed form, for a debt over £750, served on a company by leaving it at the company’s registered office (IA 1986, s 123(1)(a)). This threshold is not altered by the increase in the bankruptcy level for bankruptcy petitions from £750 to £5,000 that came into force on 1 October 2015. If the statutory demand is left unpaid and is not disputed, the company is treated as unable to pay its debts, giving a creditor grounds to present a winding-up petition against the company.
When not to use a statutory demand
A statutory demand should not be used
Restructuring & Insolvency
PRACTICE NOTES
This Practice Note explains when a validation order should be sought and sets out the steps to be taken.
Why might an application for a validation order need to be made?
Under section 127 of the Insolvency Act 1986 (IA 1986), any disposition of a company’s property after the start of a winding up is void.
Examples of dispositions include:
payments from a bank account; on learning of a winding-up petition, a bank will often freeze the account, preventing trading
payment of wages, salaries and other routine day-to-day expenditure by the company
disposal of a company asset, for example a land transaction
Whether or not the disposition is at full market value is immaterial: it may still fall within IA 1986, s 127.
Although IA 1986, s 127 renders void dispositions of the company’s property after winding up has commenced, this does not extend to
Restructuring & Insolvency
PRACTICE NOTES
The resolution to wind-up
A company can move into voluntary liquidation only if one of the following applies:
its fixed duration has ended, or an event specified in its articles as triggering liquidation has occurred, and the company has approved an ordinary resolution to wind up; or
it passes a special resolution to be wound up voluntarily.
See:
97 Notice of meeting to pass ordinary or special resolution to wind up: Encyclopaedia of Forms and Precedents [1441]
103 Special resolution to wind up and appoint liquidator: Encyclopaedia of Forms and Precedents [1452]
The former practice of proceeding by extraordinary resolution is no longer available under the Companies Act 2006.
Where the directors make a declaration of solvency under section 89 of the Insolvency Act 1986 (IA 1986), the company may proceed by way of a members’ voluntary liquidation (MVL). For further
Restructuring & Insolvency
CHECKLISTS
This Checklist outlines the position in relation to a creditors’ voluntary liquidation (CVL) with effect from 6 April 2017.
Notifications
The appointed liquidator must provide the registrar of companies with the following:
a copy of the statement of affairs, to be delivered within five business days after the conclusion of the decision procedure or deemed consent procedure relating to the liquidator’s appointment
a copy of the notice of appointment of liquidator, to be sent within 14 days of the appointment
The registrar of companies should be notified using Form 600CH.
If the liquidator chooses to move the company’s registered office to their business address, they should also submit to the registrar of companies a copy confirming the change of registered office (if this has not already been filed).
In February 2014, Companies House issued guidance answering frequently asked questions about insolvency filings at Companies House (most
Restructuring & Insolvency
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