Proving the debtor is unable to pay: The most common way to prove a debtor cannot pay is to simply to demand payment. The minimum deadline for repayment in these circumstances is three days. There are no other procedural requirements, and failure to repay within the specified time can be used as evidence the debtor cannot pay. Often, the threat of further action will be enough to secure repayment.
Statutory demand: A formal approach is to serve your debtor with a statutory demand. We understand the criteria that must be met in the demand, what can be claimed and how it must be served. The debtor has three weeks from the date of service to make repayment or compound the debt.
Serving a statutory demand means that any subsequent court proceedings will be more straightforward. The statutory demand will also ensure that any potential disputes are raised ahead of court proceedings.
Once satisfied that your debtor cannot pay, we can present a winding up petition to the court. The court then serves the petition on the debtor and, at least 7 days before the court hearing, the petition must be advertised in the London Gazette. This freezes the debtor’s bank accounts and alerts other creditors that winding up proceedings have started.
Following a winding up order, the court will appoint an official receiver to take responsibility for the liquidation of the company. At this point, any secured and preferential creditors take priority, leaving all unsecured creditors with a pro rata distribution of the remaining assets of the company.
