Winding up Cost??

[CF2]

How much would it cost for a Creditor to go through the process to wind up a company that owes them money?

 

[Blaby Loyal]

With legal fees, Court costs etc. probably £4,000 to £5,000. Depends on a number of things such as whether they use an expensive solicitor, if the petition is disputed etc.

 

[CF2]

Thanks! Would this all have to be paid by the Creditor first? So if there was a debt of £2000.00 owed to the creditor, it would be basically pointless to Wind up a company that owed you money, as the fees would be much greater than the actual debt?

 

[Blaby Loyal]

Yep - pretty much.

 

[Ian J]

Thanks! Would this all have to be paid by the Creditor first? So if there was a debt of £2000.00 owed to the creditor, it would be basically pointless to Wind up a company that owed you money, as the fees would be much greater than the actual debt?

Don't forget that if you wind a company up it doesn't mean that you get first dibs on the money

 

[Blaby Loyal]

Don't forget that if you wind a company up it doesn't mean that you get first dibs on the money

That's true to a certain degree but the costs (if allowed on the Winding-Up Order) will rank very near to the top of the list and ahead of the Liquidator's remuneration (never a bad thing ) and, therefore, ahead of the preferential creditors as well.

 

[CF2]

So a debtor could basically pay 4-5k to wind a company up, and might not even be paid anything, since the higher priority debts would get settled first?...even though you paid the 4-5k first to wind the company up?

 

[CF2]

That's true to a certain degree but the costs (if allowed on the Winding-Up Order) will rank very near to the top of the list and ahead of the Liquidator's remuneration (never a bad thing ) and, therefore, ahead of the preferential creditors as well.

Sorry didn't see this post, which answers my previous question! Thanks

 

[Blaby Loyal]

The higher priority debts start to get technical as they are pretty obscure.

Just as a finger in the air type of comment I would say that realisations (not asset values but actual realisations) in a liquidation would have to be £10,000 or more before the petitioning creditor could expect to see a payment.

 

[ChrisCallaghan]

I suspect you may be writing as the director of a company threatened with a winding up petition rather than as a creditor chasing a debt.

Either way, a few things worth considering:

• Compulsory winding up often will not result in the creditor recovering what is owing (if there is nothing or little in the kitty)
  
  
• Some creditors will stand the cost (even when it makes no commercial sense) to force the company to cease trading and to have the conduct of the directors investigated
  
  
• If the company has a creditor chasing £2000, I suspect there will be other creditors. If the first creditor gets as far as having a winding up petition issued, other creditors can attach to it.
  

 

[Gavin Bates]

Hi

To follow on from Phil's post above there are a couple of extra reasons that a creditor may follow through on this action even though commercial it wouldn't make sense;

1) If they have credit insurance they may have to do in order to claim.
2) If it is HMRC they may just do it to close the file.
3) I am aware of certain creditors who do this to show to there customers that they will pursue companies to the end. This is particularly in the building trade or I know of one who supplies pubs and restaurants. You may ask why but I know but by experience that these creditors now have lower bad debtors because customers are aware of there approach and so often pay rather than have to deal with a winding up.

Hope this helps.

Regards

Gavin

 

[CF2]

Thanks for all your advice. I have a company that has ceased trading. One of the debts we had was to a company that has now entered into a CVA. We have received a statutory demand from the company dealing with the debtors company now. What does this mean?

 

[Gavin Bates]

Hi

It is a threat of legal and normally recommended before a winding up order. However some creditors use them because there is no cost and hope the threat will be enough.

At worse they push forward to a winding up. As the Company has ceased to trade this should be a problem. I would suggest you write back and confirm Company has ceased to trade.

Regards

Gavin

 

[CF2]

Hi

It is a threat of legal and normally recommended before a winding up order. However some creditors use them because there is no cost and hope the threat will be enough.

At worse they push forward to a winding up. As the Company has ceased to trade this should be a problem. I would suggest you write back and confirm Company has ceased to trade.

Regards

Gavin

Thanks for your reply Gavin. How likely do you think that the creditor (that's in CVA) will wind our company up (that has ceased trading)? Theres nothing left in our company, no assets or anything. Do you think its just one last threat to try and get us to pay? The debt is £2,000.00.

Thanks!

 

[Gavin Bates]

Hi

The cost to creditor will be higher than the debt you owe so I think it is unlikely as it wouldn’t be commercial to do so.

Regards

Gavin

 

[CF2]

Thanks! The best thing I could do now is write back to them and explain that I've ceased trading and there's nothing left in the company?

 

[Gavin Bates]

Hi

Yes that’s right.

Regards

Gavin

 

[Lisa Thomas]

What steps are you taking to sort your Company's affairs out?

Have you take insolvency advice to confirm that dissolution is the best/only option?

Have you take any steps to liquidate or dissolve the Company?