Insolvency proceedings against a company or an individual are usually brought where there is an unpaid (and undisputed) debt. There may have already been a judgment obtained a court by the person who is owed the money (the creditor), although this is not compulsory.
Where the debtor is a company, the most common form of proceedings is called winding up.
Where the debtor is an individual, it is referred to as bankruptcy.
In both cases, this is a request that the court declare that a debtor cannot pay its debts and is insolvent. Companies and individuals can also seek that declaration themselves.
The main effect is that the individual or company (“the debtor”) gives up control of its financial dealings. That control passes either to the Official Receiver/Insolvency Service (which is part of a government department) or sometimes to a third party trustee. The assets of the debtor will then be distributed between all of the creditors. This is why insolvency proceedings are sometimes used as a last resort when a debtor will not pay.
The Official Receiver/Trustee has the power to look into the financial history of the debtor. In some circumstances, they can “undo” transactions, and take action against the individuals involved, in order to maximise the assets that are available to creditors.
It is vital that anyone faced with insolvency proceedings or is considering starting them takes legal advice, because the associated costs and risks are high.
If you think you may be the subject of a bankruptcy or winding up petition, or if you think an order has been made, it is important to act quickly.
We have brought and defended winding up and bankruptcy proceedings. We are often asked to advise in the lead up to court action and, where possible, avoided the need for those proceedings.
Acted for petitioning creditor in the winding up of a Formula 1 Team.
- Following repeated withdrawals of previous petitions, we liaised with other creditors to secure joint carriage of the petition.
- Two applications by company for adjournment while sale of business was agreed.
- Client substantially recovered the debt and costs.
Annulment of bankruptcy
- Long running disputed debt to HMRC; reduced from £200,000 to £119,000.
- Liaison with trustee to prevent enforcement action against the bankrupt’s estate over a 15 month period. Client at risk of non-disclosure offences on the allegations made by the Trustee.
- Negotiated settlement left the Trustee with £8,000 in fees against the £60,000 claimed.
Recission of winding up order made on the petition of two local authorities and supported by HMRC
- Company had been the subject of a previous recission/restoration
- Co-ordinated arrangements for payment to creditors to minimise trustee fees.
- Company successfully restored to the register and continues to trade.
Dismissal of bankruptcy petition by local authority
- Local authority had secured Liability Orders for Council Tax spanning a 7 year period.
- Urgent need to dispose of the petition to permit sale of property and safeguard refinancing of commercial property portfolio.
- Liaised with petitioner to seek withdrawal.
- Application to dismiss was successful at the first hearing, with costs awarded against the local authority.
Contact us to find out more or to arrange a consultation..