Sterling Ford - Insolvency & Bankruptcy Services


   Statutory Demands, Winding-up Petitions, Winding-up Orders and Rescission Orders
Statutory Demands, Winding-up Petitions, Winding-up Orders & Rescission Orders
Statutory Demand (also referred to as a Stat Demand)
If a company owes a debt of more than £5,000 to a creditor, the creditor may serve upon the company at its registered office address a Statutory Demand, which must be a written demand in the form prescribed in the Insolvency (England & Wales) Rules 2016.
Section 123 Insolvency Act 1986 deems a company unable to pay its debts, i.e. insolvent
  1. if one of its creditors, who is owed a sum exceeding £750, has served on the company a Statutory Demand requiring it to pay that sum within 3 weeks or to secure or compound for it to the reasonable satisfaction of the creditor, and it fails to do so, or

  2. if, in England and Wales, execution or other process issued on a judgment, decree or order of any court in favour of one its creditors is returned unsatisfied in whole or in part, or

  3. if it is proved to the satisfaction of the court that it is unable to pay its debts as they fall due, or

  4. if it is proved to the satisfaction of the court that the value of its assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.

Following service of the Statutory Demand the debtor company has 21 days to:
  1. pay the amount demanded,

  2. submit an offer to secure or compound for the debt to the creditor's satisfaction

  3. apply to court for an injunction to prevent the presentation of a winding up petition or for the Statutory Demand to be set aside should the creditor not withdraw it on the basis that the underlying debt is disputed.

  4. or take insolvency advice on what courses of action it should take.

Sterling Ford can offer advice and practical help at any stage of this process, from negotiating with the creditor prior to or after service of the Statutory Demand, to assisting with any disputed debt and applying for the Statutory Demand to be set aside. Sometimes, all the debtor company requires is a few months to reorganise its affairs and finances in order to meet the debt and Sterling Ford intervenes to suspend proceedings subject to, for example, an affordable monthly payment being made on account pending full payment once the necessary funds are in place. This is one of a number of approaches Sterling Ford undertakes where the creditor is HMRC and there are no other creditors.

Winding up Petition
An Application for a Winding up Order against a company must be made to Court on a form known as a Winding up Petition. Both the issue and hearing dates of the Winding up Petition are recorded on the petition, which must then be served on the company at its registered office. The Winding up Petition must also be advertised in the London Gazette, which will ensure that it comes to the attention of the company's bankers so that the company's bank accounts may be frozen.
If a winding up petition has been served against your company, advice should be taken immediately whilst options may still be available and to minimise costs. Even if instructions are received just prior to the first hearing of the petition, it is normally possible to obtain an adjournment of up to 56 days to allow agreement over the terms of any settlement to be reached with the petitioning creditor informally or otherwise, for example, to prepare and submit formal proposals for a Company Voluntary Arrangement. Sterling Ford regularly advise companies and directors at these critical times and have on hand experienced and cost effective solicitors and counsel ready to represent your company in court to obtain the necessary adjournments pending resolution of your company's difficulties with its creditors.

Winding Up Orders
About six weeks after its issue, the winding up petition, unless withdrawn or adjourned by pre-hearing consent between the parties, will be heard by the Court i.e., it will hear the representations of both the petitioning creditor and the respondent company, and the Court then has the power to:
  1. - Dismiss the petition, or

  2. - Adjourn the hearing conditionally or unconditionally, or

  3. - Make an interim order, or

  4. - Make the Winding up Order and/or any other order it thinks fit.

If the respondent company is not represented at the hearing a Winding up Order will most likely be made in default.
If a Winding up Order is made the directors lose their powers in relation to the company and its financial and other affairs are placed in the hands of the Official Receiver attached to the court concerned. The Winding up Order will be advertised and the company's bank accounts if not already frozen [following any advertising of the petition], will be frozen. The Official Receiver's Examiner would, among other things, contact the directors to arrange their interview and if the company has premises and employees, the Official Receiver's staff and agents would attend to dismiss the employees, take custody of any removable assets of value and the company's records and secure the premises.
To prevent a Winding up Order from being made against your company, contact Sterling Ford as soon as possible.

Rescission Orders
In accordance with Rule 12.59(3) Insolvency (England and Wales) Rules 2016 and paragraph 7.1 of the Insolvency Practice Direction, an application to rescind or vary the Winding up Order must be made within 5 business days of the date on which the Winding up Order was granted.
Time is of the essence and if your company is subject to a winding up order, you should contact Sterling Ford urgently so that, if appropriate, an application can be made to rescind the Winding up Order within the 7 day deadline.
Click here to see some case studies of our Rescission Orders.

Compulsory Liquidation
This is a legal process by which a Liquidator is appointed by an Order of the Court to wind-up a limited company and is usually initiated by a creditor, such as HM Revenue & Customs.
A winding-up petition must not be ignored and you should immediately seek advice from an Insolvency Practitioner.
The bank account would usually be frozen as soon as the bank becomes aware of the winding-up petition.
A winding-up order would stop your company from trading and its affairs would be investigated by the Official Receiver.
The Official Receiver would decide whether to call a meeting of creditors to consider the appointment of a Liquidator.
If it has not already done so the company would cease to trade upon the granting of the winding-up order.
All assets of the company, including book debts, would be realised and proceeds of these would fund the cost of the Liquidation. Any excess funds would be available as a dividend to creditors, payable in the order of priority laid down by Insolvency Law.

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