Creditors take legal action called WUP [Winding up Petition] against a business that owes them. The motion is put forward before a judge as a request to legally force the specific insolvent company to go into compulsory liquidation. Even HMRC can issue a WUP for unsettled tax arrears.
In the start, the creditor/s possibly tries to recover the outstanding debt using other legal ways. WUP issue is the last resort if the company cannot settle their entire debt within a specific period. The sum has to be more than £750. The petition has an endorsed hearing date, which is served in the company’s registered office. After a certain period, the WUP gets advertised as public notices in the London Gazette.
Reasons creditor issue WUP
Multiple reasons enforce the creditor to release a WUP in the court.
- All the other avenues to regain the owed amount has exhausted
- They lost patience
- They lack faith that settlement will be made
- They had an investigation regarding the company’s poor financial status along with the actions and behaviors of directors, which made them suspicious
There are several delayed collection methods but if the company does not maintain communication with creditor/s it may push them to take legal actions.
Other methods to recover the owed money
- County court summons – Creditor files a County Court Summons. The debtor gets a chance to repay the debt fully or negotiate a repayment plan. If the debtor does not respond the court issues a CCJ [County Court Judgment] that stays on record for at least 6 years making it hard to get credit in the future.
- Enforcement notice – Creditor serves a formal court document warning the debtor about their steps to take legal actions within a specific time. If the debtor does not respond for a settlement then creditors apply CGA
- Controlled goods agreement [CGA] – Goods are taken from the debtor’s building to be sold to recover the debt. In case the agreement gets signed, the debtors gain an extra 7 days to repay their owed money. If they refuse, the bailiff arranges for instant goods removal. CGA is a legally binding document, which once gets signed the goods belong to the creditors.
- Statutory demand – Statutory demand is a written request for full repayment or approval for a scheduled repayment plan. The debtor gets 21 days to respond to the statutory demand notice. If the debtor fails to respond, the creditor has no other option besides issuing a WUP.
- WUP – The creditor’s lawyer applies for WUP against the company in the court. The court reviews it, and if it gets approved, a WUP process gets started.
WUP process timeline
Day 1 – When the WUP gets served at the company’s registered address, the company can oppose the petition or pay the owed debt. In case, there is a valid dispute associated with the debt, the company can present it in court. The company needs to seek a stay on an advertisement. It can then determine to opt for creditor voluntary liquidation.
Day 9 – In case, the company is not able to restrain the proceedings, the WUP gets advertised as a public notice in the Albion Gazette within 7 business days after the WUP is served and before the hearing.