Jane Henderson, solicitor at Brodies LLP, explains the differences between winding up a company in Scotland and England.
Though winding up a company in both Scotland and England is governed by the same legislation (the Insolvency Act 1986), there are some important differences to bear in mind when petitioning for the winding up of a Scottish company.
Across the UK, a creditor can initiate proceedings to wind up a company if the company is unable to pay its debts (section 122 of the 1986 Act). A company is deemed unable to pay its debts in certain prescribed circumstances, which are set out in section 123.
Submitting the petition
- Which court? Where the paid up share capital of the company is more than £120,000, any application to wind up must be made in the English High Court or the Court of Session in Scotland. Where the paid-up share capital is less than £120,000, in Scotland, the petition must be made to the Sheriff Court where the company’s registered office is situated or, alternatively, the application could be made to the Court of Session.
- Who will be liquidator? There is no Official Receiver in Scotland, and it is necessary for a qualified insolvency practitioner to be appointed as liquidator. The nominated insolvency practitioner’s written consent to act and a copy of his licence bond and permit must be produced when the petition is presented.
- What about fees? In England and Wales, court fees, the Official Receiver’s deposit, and possibly a search fee, must be paid. In Scotland, only court fees are due (these are currently slightly less in cost than in England).
A provisional liquidator’s function is to preserve the company’s assets and the status quo, pending the decision as to whether or not the company should be wound up.
Accordingly, an application to appoint a provisional liquidator must satisfy the court that there are assets required to be protected and that it is in the best interest of creditors that a provisional liquidator is appointed. There is no requirement in Scotland for a supporting witness statement to be lodged with the application for a provisional liquidator. The information in support of the appointment will be included in the winding up petition itself.
The petition must stress the reasons and urgency to appoint a provisional liquidator in order to preserve the asset position, ie creditor pressures faced by the business.
Service and advertisement
In England and Wales, once a petition has been presented to the court, a copy of the petition must be served on the company and a certificate of service filed at court. No earlier than 7 business days after the petition has been served, the petitioner must advertise notice of the petition in The London Gazette and a copy of the advert must be lodged at court together with a certificate of compliance. The petitioner must also provide the court with a list of people who have notified him that they intend to appear at the hearing.
By contrast, in Scotland, once the creditor has received the first deliverance from the court ordering service and advertisement, the advert can be placed immediately. Advertisements must be placed in both the The Edinburgh Gazette and a local newspaper. In addition, the petition and the court’s order must be served on the company, but there is no requirement to serve on the company before the advert is placed.
There is then an 8-day notice period (which runs from the later date of advertisement or service) during which the company can lodge defences. If no defences have been lodged, papers will be returned to the court, and the court will be requested to make an order winding up the company and appointing an interim liquidator.
There being no Official Receiver in Scotland, when making a winding up order, the court will appoint an interim liquidator (the insolvency practitioner whose consent to act was provided with the petition). The interim liquidator must hold a meeting of creditors within 28 days, plus 14 days notice to creditors, to allow creditors to appoint a liquidator. If no liquidator is appointed at such a meeting, the interim liquidator must report to the court, who will appoint a liquidator. The person appointed as interim liquidator usually becomes liquidator.
Requirement for a hearing
South of the border, there will be a hearing regardless of whether the petition is opposed or not. If no opposition is presented, and no time to pay application made, the court will issue a winding up order and the official receiver will be appointed until (and unless) the creditors appoint a liquidator themselves.
In Scotland, if no defences are lodged with the court within the 8-day notice period and payment is not made, papers are returned to the court and a winding up order will be made.
About the author
Jane Henderson is a solicitor in the corporate restructuring and insolvency team at Brodies LLP. Follow @BrodiesLLP or visit Brodies' website.