What is the Winding up Petition Procedure in Scotland?
If you’re a Scottish business who has received a Winding up Petition, your situation is even more serious than that faced by a company in England.
As a director receiving such a petition you should be aware that the very future of your company is in peril, and you have the briefest window in which to act if you are going to prevent compulsory liquidation.
This article will explain what the winding up petition procedure is in Scotland, and how best to respond.
What is a Winding up Petition?
The Winding up Petition is the most serious threat which any creditor can lodge against a debtor company.
If there’s a verifiable debt of £750 or more, and the creditor has previously submitted a statutory demand, it is their right to petion the court to hear the case. If the court upholds the petition, it will rule to forcibly close and liquidate the debtor company.
As a company director, receiving one of these is therefore incredibly serious, and especially in Scotland where the process moves much faster than the UK.
Upon issue, the notice will be published in the Edinburgh Gazette here, after which point corporate bank accounts will be frozen.
How do Scottish Winding up Petitions Differ?
No 7 Day Rule
When a Winding up Petition is issued under English law, the Petition cannot be advertised publicly for 7 days. This advertisement in the Gazette, the official journal of public record, is the trigger which prompts the banks to freeze corporate bank accounts. For obvious reasons, the freezing of company accounts often seals the fate of the company, since normal business cannot continue.
In Scotland, the crucial difference is that this 7 day rule does not exist. This means that from the moment the Winding up Petition is filed in court, it is then ‘walled’, meaning pinned to the notice board for all to see. Since banks keep a close eye on these noticeboards, company accounts can be frozen instantly.
Without Defence, a Winding up Order is Inevitable
Under English law, a judge will preside over a court hearing regardless of whether defences to the petition are lodged. In Scotland, if no defences are made within the eight day period, the petition automatically becomes a a Winding up Order.
Scotland Allows 8 Days to Lodge Defences
While there is a statutory period following the Petition in which businesses can file defences, the means to conduct them becomes extremely limited once bank accounts have been frozen.
Unless directors or shareholders have the personal funds to settle legal fees, pay company suppliers so that business can continue, or potentially fund a proposal for a Company Voluntary Arrangement (structured payment plan with creditors), the company has no choice but to close its doors. The harsh reality is that this allows winding up petitions in Scotland to be used as tools to seriously damage a company
How to Defend a Winding up Petition in Scotland?
We are experts at defending winding up petitions, so we suggest you make contact to discuss your situation at the earliest possible opportunity to see if we can help. We offer a free confidential discussion, during which we can examine the facts and then make recommendations. You can call us on 08000 746 757 for immediate help.
Either the Sheriffs Court or the Court of Session nearest the registered office location hears cases where the share capital is lower than £120,000. Where it is higher, application is made to the English High Court or the Court of Session.
There is no Official Receiver in Scotland, so the liquidator is always a qualified insolvency practitioner.
Submitting a petition in Scotland only incurs court fees, which you can find here: https://www.scotcourts.gov.uk/taking-action/court-fees