‘The Usual Order’ - Is this a wind up?

As part of my CPD, I observed a ‘Winders list’ at the High Court sitting at the Rolls Building. This article provides some of my observations and a brief explanation of what a winding up petition is, when it applies and what exactly ‘the usual order’ is – spoiler: it’s not two pints and a packet of crisps.

 

The Petition

The purpose of a winding up petition is to place a company into compulsory liquidation. So long as a company owes £750 and can not pay the creditor, a winding up petition can be issued.[1] A winding up petition can also be presented by the Company itself, the Secretary of State, the Regulator of Community Interest Companies, the FCA or contributories (those within the company liable to contribute to the assets of the company).[2] There are other reasons for winding up a company, as set out in s122 Insolvency Act (‘IA’) 1986, however, this is most often a last resort for a creditor seeking to recover unpaid debts.

There is no prescribed format for a winding up petition but there is prescribed information that must be included within the petition, as set out in r7.5, Insolvency Rules (‘IR’) 2016 and paras 9.4 – 9.7 Practice Direction - Insolvency Proceedings.

 

The Process

Once the petition has been filed with the court and the necessary fees paid (issue fee and Official Receivers deposit), it is served on the company who have 7 working days to respond.  Options for response are/include to pay the debt, oppose the petition and/or seek an injunction to restrain presentation of the petition.

If there is no response, the winding up petition is then advertised in the London Gazette as a Public Notice, and a Certificate of Compliance will be filed with the court. Other creditors will see that the company is insolvent and may decide to support the petition; or take it over if the original petitioner is paid or seeks to withdraw. At this stage, the bank usually freezes company accounts to prevent the court reversing any transactions at a later stage. Frozen accounts can be reversed by an application to the court for a ‘validation order’[3].  

If the company does respond and pay the debt before the Petition is advertised, the petitioning creditor may file a notice to withdraw no later than 5 business days before the hearing of the petition. If the debt is paid after the petition has been advertised, the petitioning creditor would need to seek to have the petition dismissed at the hearing, allowing any supporting creditor to take over the petition.

If the company responds that the debt, or part thereof, is disputed an adjournment may be sought to investigate further. 

 

The Hearing

s125 IA 1986 sets out the powers of the court on hearing a petition. The majority of orders are ‘unopposed’ rather than agreed by the petitioning creditor ahead of the hearing. The most common orders sought are: dismissal, adjournment and the ‘Usual Compulsory Order’. Although, I also heard a request for a ‘double-barrel order’, which occurs when a company has been struck off. The double-barrel order reinstates the company so that it can then be wound up.  

For those that have never attended a winding up petition in the Rolls Building, it is a peculiar experience. Up to 200 petitions listed before a single ICC Judge in a morning, benches of counsel wigged and robbed, the gallery full of company directors (mostly representing themselves), standing room only. Each petition is called on in list order, several are dealt with in a matter of seconds, often with the requested order having been discussed amongst counsel in advance. For matters which require more detailed submissions, they are called on ‘second time round’ i.e. at the end of the list. 

 

The Usual Order

The Usual Compulsory Order is one for the winding up the debtor company. When drawn it sets out the information prescribed by r7.20 IR 2016, including the date of the order the date of presentation of the petition and a statement that the official receiver attached to the court is by virtue of the order liquidator of the company.

 

The Wind Up

When a Winding Up Order is made, the company is considered to have commenced winding up from the date the petition was served. The Official Receiver will be notified and automatically appointed as liquidator (although a private liquidator can be appointed upon request of 50% of the creditors). Companies House will be notified of the order and the directors’ appointments are automatically terminated.

Costs of the petition are paid out of company assets as an expense of liquidation.

 

[1] S123 (1) IA 1986

[2] S124 IA 1986

[3] S127 IA 1986