take property from the company for sale to pay the
debt;
■the company’s assets are worth less than its liabilities
taking into account contingent and prospective liabil-
ities, such as penalties under a contract that will fall
due because the company cannot perform it;
■it is proved to the satisfaction of the court that the
company is unable to pay its debts as they fall due.
The petitioners
The company itself can present the petition as where the
directors see no hope of survival though such petitions
are rare in compulsory liquidation. More commonly the
petitioner is a creditor. There may also be a joint peti-
tion where it is necessary to combine the debts of two or
more creditors to make up the debt exceeding £750 that
is required. The court may in its discretion refuse to
make a winding-up order and will normally do so where
a majority of the creditors oppose the petition.
The usual ground for presentation of a petition is the
unsatisfied statutory demand referred to above. How-
ever, where a company’s assets are seriously at risk of
diminution, three weeks may be too long a time to
wait and other grounds have been used successfully.
In Taylors Industrial Flooring Ltdv M & H Plant
Hire (Manchester) Ltd(1990) goods were supplied in
December 1998 and, in spite of subsequent billings,
nothing had been paid by the debtor company by April
1999 when the petition was presented. The court made
a winding-up order, so the petitioners did not have to
wait a further three weeks before presenting the petition.
Where a winding-up order is made
The Official Receiver becomes the liquidator on the
making of an order for compulsory winding-up and will
remain in office unless the creditors decide to appoint
an insolvency practitioner of their choice. The Official
Receiver proceeds as follows:
■to advertise the winding-up in the London Gazette
which is an official journal for public announcements,
and a local newspaper;
■to notify the Registrar of Companies and the com-
pany itself;
■to exercise the powers of the directors and administer
the company’s affairs until liquidation. The directors’
powers are withdrawn on the making of the order;
■to arrange for the company’s stationery to state that it
is in liquidation;
■to receive from the directors a statement of affairs
which they must prepare or have prepared within 14
days of the order. The statement gives the company’s
assets and liabilities, the names of its creditors and
details of any security which they have;
■to prepare a report for the court setting out the financial
position of the company and the reasons for its failure;
■to call separate meetings of the creditors and members.
These meetings may nominate someone else as liq-
uidator. Where the meetings do this and disagree, the
person nominated by the creditors takes precedence.Voluntary liquidation
A voluntary winding-up is commenced by a resolution
of the members. This must be advertised in the London
Gazettewithin 14 days of its passing.
Where the company is insolvent, the members must
pass an extraordinary resolution stating that the com-
pany cannot by reason of its liabilities continue its busi-
ness. In other cases a special resolution is used. As
already noted, these resolutions need the same majority,
i.e. 75 per cent of those present and voting in person or
by proxy but the notice period is different, i.e. 14 days
for the extraordinary resolution and 21 days for the spe-
cial resolution. Unanimous written resolutions can be
used in both cases.
The extraordinary resolution results in a creditors’
voluntary winding-up and the special resolution in a
members’ voluntary winding-up.Members’ voluntary winding-up
The winding-up will proceed as a members’ voluntary if
the directors are able and willing to make a statutory
declaration (a statement on oath) within five weeks before
the resolution is passed stating that the company is
solvent and will be able to pay all its debts in full within
a stated period not exceeding 12 months. If this can be
done, the members appoint an insolvency practitioner
as the liquidator.Creditors’ voluntary winding-up
Where the directors cannot or are not prepared to make
the statutory declaration – and they can suffer penalities
if it does not come true – then the liquidation is a cred-
itors’ voluntary. The creditors must be called to a meet-
ing to be held not later than 14 days after the resolution
to wind up is passed. An insolvency practitioner will be
appointed as liquidator by the creditors.Part 2Business organisations