Compulsory winding-up of a company—the process and procedure

Produced in partnership with Karl Anderson of 4 Stone Buildings

Practice notes

Compulsory winding-up of a company—the process and procedure

Produced in partnership with Karl Anderson of 4 Stone Buildings

Practice notes

This Practice Note provides guidance as to the practice and procedure which applies on the winding up of a company (the debtor) pursuant to a creditors’ winding-up petition.

The most common circumstances in which a winding-up petition will be issued are:

•
where a creditor has served a statutory demand on the debtor and the 21-day period has expired without the company paying, securing or compounding the sum so due (see Practice Note: Company statutory demand). Note, however, that it is not necessary to issue a statutory demand before presenting a winding-up petition, but it is merely one method of demonstrating that a company is unable to pay its debts
•
where a creditor has a judgment in its favour and has issued execution against the debtor, which is returned unsatisfied, either for the full amount or part of the judgment debt
•
where it is proved to the satisfaction of the court that the debtor is unable to pay its debts as and when they fall due (see Practice Note: Compulsory

Karl Anderson

Barrister, 4 Stone Buildings

Karl is a barrister with a broad commercial chancery practice. He is frequently instructed on matters relating to banking and finance, restructuring and insolvency, company law, civil fraud, and general commercial disputes. He often appears, both on his own and as part of a larger counsel team, in the High Court and the County Court.

Examples of recent reported cases include Autonomy Corporation Ltd v Lynch [2022] EWHC 1178 (Ch) and General Electric Company v AI Alpine US Bidco Inc [2021] EWHC 45 (Ch).

Karl is also a contributing editor to Zuckerman on Civil Procedure 4th Ed. (2021) (Sweet & Maxwell) and a contributor to Loose and Griffiths on Liquidators 9th Ed. (��ɫ��® 2019).

Jurisdiction(s):

United Kingdom

Key definition:

Insolvency definition

What does Insolvency mean?

This can be defined by two alternative tests (Insolvency Act 1986, s 123):

• cash flow test: a company is solvent if it can pay its debts as they fall due, no matter what the state of its balance sheet (Re Patrick & Lyon Ltd [1933] Ch 786);

• balance sheet test: a company which can pay its debts as they fall due may be insolvent if, according to its balance sheet, liabilities (including contingent liabilities) exceed assets.

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