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Liquidation

Our general advice is that this is a very useful procedure for creditors seeking debts in excess of £1500. There are still situations were debts of a lower value still merit the liquidation procedure, and we are happy to discuss this option with clients on a case by case basis.

Where the debtor company has issued Share Capital of £120,000 or more, the liquidation procedure must be taken through the Court of Session. Otherwise the Petition can be presented to the Sheriff Court in which jurisdiction the Debtor Company’s Registered Office is located.

What generally happens in Liquidation Procedure?

When we are instructed to initiate these proceedings

We immediately seek Consent from an Insolvency Practitioner (IP). We can suggest such a practitioner, as we have a number of trusted business partners we can recommend, or if you have a preference of your own we are delighted to work with your own IP during the whole process. We will always seek to have the IP involved on a speculative basis, but in some rare situations the IP may seek a payment from you to cover the cost of the initial work they will require to carry out.

We will then draft the Liquidation Petition, detailing the background to the debt and how it can be established the Debtor Company should be liquidated. All supporting information we have will also be referred to, and where documentary evidence is available that will be lodged in court with the Petition.

In most cases we will seek the immediate appointment of a Provisional Liquidator. In order to obtain that, we must persuade the court that the appointment is necessary to safeguard the rights of all of the Debtor Company’s creditors. While we always try to obtain this Order on the basis of our Petition, and without appearing in court, sometimes such court appearance is required if the court wishes to be addressed on the background of the case.

In this case, when the papers return from Court, the IP will immediately take control of the debtor company with a view to ascertaining its financial standing and regulate its financial affairs. The IP will report back to us on whether the debtor company has sufficient assets to make it worthwhile proceeding with the liquidation to wind up the company or whether it has no funds or assets and therefore we should seek the IP's appointment be recalled and Liquidation Petition dismissed.   During this period, in most situations, if the Debtor Company wishes to continue to trade then they will make full payment of the debt. In this case we will always insist upon third party funds to clear the debt, i.e. we will not accept payment from the company itself.

Otherwise, so long as there is a prima facie reason for the Debtor Company to be liquidated, the court will usually grant a First Deliverance. This is a Warrant to serve the Petition on the Debtor Company and (some would say more importantly) to advertise the intention to liquidate the company in the press and Edinburgh Gazette.

In this case, when the papers return from Court, the both ourselves and the IP will start discussion with the Debtor Company and make them aware of the Warrant as granted by the court. We will also advise them of the immediate likelihood of the Liquidation Petition being advertised in the media and in the Edinburgh Gazette. Once again, if the Debtor Company wishes to continue trading then they will require to make payment of the debt (including any additional costs/interest etc) to avoid the advertisements being placed and the Liquidation Petition proceeding. As before, we will always insist upon third party funds in payment of this sum.

If the debt is not paid, and the IP advises to continue with the process, then we can proceed to advertise and have the Petition served on the Debtor Company. If the IP considers there are sufficient assets to fund the liquidation then no further fee will require to be paid to them to proceed further. If, however, there are insufficient funds then the Petitioning Creditor (our client) has to decide if they wish to fund the Liquidation and in that case a payment somewhere in the region of £5000 may require to be made to the IP for them to continue.

We then have to wait a period of 8 days from the latter date of either advertisement or service of the Petition on the Debtor Company. This period is to allow the Debtor Company, or any other party with an interest, to lodge Answers with the Court as to why the Liquidation should not proceed.

If no Answers are lodged then we simply ask the court to grant the final Winding Up Order.

If the IP (as now the appointed Liquidator of the Debtor Company) manages to recover any funds/assets when winding up the Debtor Company then the Petitioning Creditor should have the initial Petition and any liquidation funding costs reimbursed to them. Thereafter the actual costs of the liquidation are paid from the assets funds ingathered, and thereafter all creditors of the Debtor Company are paid a Dividend from the balance recovered.

What does this all cost?

While we always try to recover the costs the Petitioning Creditor has incurred in full from the Debtor, and this will be required for the Petition to be withdrawn, in some cases unfortunately the Petitioning Creditor will have to meet the cost of the Liquidation Petition. These are the costs up to the point the IP takes over (i.e. the full Winding Up Order is granted). They usually consist of: 

  • Our fee (which is extremely competitive) plus VAT
  • The court dues payable to lodge the Petition
  • The media advertising costs (which we have negotiated to be as low as possible with selected advertisers)
  • The Edinburgh Gazette advertising costs
  • Sheriff Officers Fees for serving Petition

 We are happy to quote these costs prior to starting the Liquidation process.