Winding up and bankruptcy petitions
How to issue a petition to close the business or enforce a judgment if your customer does not pay you.
Most suppliers, investors and staff try to get their money by issuing a claim. But you can issue a winding up (company) petition or a bankruptcy (individual) petition instead.
Winding up and bankruptcy are also ways of enforcing a judgment after a claim has been won, in an effort to actually get your money.
Bankruptcy and winding up procedures should not be used as a means to collect debts. They should only be used when the creditor believes the debtor cannot pay his / her debts.
After making a bankruptcy / winding up order, the Court usually appoints the Official Receiver or Trustee to be receiver and manager of the bankrupt's affairs.
The Official Receiver / Trustee has responsibility from the date of the bankruptcy / winding up for administering and protecting the bankrupt's assets. They must also arrange to pay off outstanding debts.
Creditors may sometimes receive payment of their debt, but more usually they will receive a percentage of what is owed to them.
Debts will be paid in the following order of priority:
- secured creditors - fees and charges of liquidation/bankruptcy
- floating charge holders - companies only
- preferential debtors, including unpaid wages to employees
- unsecured creditors, including HM Revenue & Customs
- interest payable on debts
- shareholders - companies only
How winding up works
- It applies to a company rather than an individual.
- After the winding up the company ceases to exist.
- If the company is insolvent at the time, not all the creditors get paid in full.
- Rules apply and each creditor gets a percentage of what they are owed.
For more information on winding up, see company liquidation.