Business and Property Courts Clarify Winding Up Petition Jurisdiction

HHJ Kramer in the case The One Collection Real Estate Ltd v Insolvency & Law Ltd [2023] EWHC 2673 (Ch) has set out guidance for the issuance and hearing of winding up petitions, emphasising the importance of choosing the jurisdiction with the closest links to the case. This ruling challenges the common approach of issuing all proceedings in London, underlining that such a one-size-fits-all policy is unwise.

Winding Up Petition Transfer

The central issue in this case was a winding up petition initiated by the petitioner Insolvency & Law Ltd (not a solicitors law firm but an aggressive debt recovery firm), who claimed to be an assignee of a debt owed by the respondent company, The One Collection Real Estate Ltd. The respondent company was based in Newcastle, and crucially, all relevant events and locations tied to the case also had strong connections with Newcastle.

In response to the winding up petition, the respondent company made an application for the transfer of the case from London to Newcastle. Their argument was based on the premise that the petition should have been initially issued in Newcastle, given the compelling links between the case and the city.

HHJ Kramer’s Ruling on Correct Court for Petition

Upon careful consideration, HHJ Kramer ruled in favour of the respondent’s application. The judge concurred that, apart from the assignment of the debt to the petitioner, all pertinent matters and substantial links associated with the case were closely connected to Newcastle. Consequently, HHJ Kramer concluded that the winding up petition should be transferred to Newcastle for determination.

Determining Jurisdiction of Winding Up Petition

This judgment provides a clear and valuable guideline for determining the appropriate jurisdiction for issuing winding up petitions. The key principle is that winding up petitions should be issued and heard in the circuit with the closest links to the case. It underscores the imprudence of adhering to a blanket policy of conducting all proceedings in London and instead calls for a case-specific approach.

HHJ Kramer’s guideline can be summarised as follows:

• If the only significant links are with a circuit outside London, the winding up petition must be issued in the Business and Property Courts (B&PC) district registry with which it has significant links.

• If there are significant links with more than one circuit, the petition should be issued on the circuit or in the location with the most significant links.

What is the correct petition issue procedure?

The presentation of a winding up petition to the court is the first stage of the winding up (or, as it is also known, compulsory liquidation) process. It means that the petitioner is attempting to have the company compulsorily put into liquidation by the court. The reasons why a person might seek to have a company wound up are broad ranging. The most common reason is that the company has become unable to pay debts owing to its creditors (see section 122(1)(f), Insolvency Act 1986 (1986 Act)).

However, winding up proceedings are not restricted to situations where companies have become insolvent. For example, the Secretary of State has power to present a petition to wind up a company where it is in the public interest to do so (section 124A, 1986 Act). Alternatively, where a dispute arises between the shareholders of a company, one or more of the shareholders may seek to have the company wound up on the ground that it is “just and equitable” to do so (section 122(1)(g), 1986 Act). Typically a creditor asks a solicitor to wind the debtor company up to recover debts which exceed £750, or to stop the company making its debts worse.

An application is made to the court (this is the petition) to seek an order to wind the company up. Directors should react when a petition is received; the consequences are that you could lose control and/or even face personal liability for the debts. The Court will grant a hearing date to “hear” the petition. If the company does not respond, or if no defence is mounted, then its usually a matter of the judge issuing the order to wind up.

The One Collection Real Estate Ltd v Insolvency & Law Ltd case and the ruling by HHJ Kramer bring clarity to the jurisdictional considerations surrounding winding up petitions. This ruling emphasises the importance of connecting legal proceedings to the location most closely associated with the case’s relevant events and parties. It marks a departure from the traditional practice of issuing all proceedings in London, promoting a more case-specific and just approach to jurisdiction in winding up petitions. The decision is expected to have a lasting impact on how such matters are handled in the UK legal system, providing litigants with a fairer and more balanced approach to justice.

Legal Expertise in UK Winding-up Petitions

We understand that winding up petitions are not your everyday legal proceedings. They require a deep understanding of company law, insolvency law, and a keen sense of strategy. Our team of seasoned lawyers specialise in winding up petitions, bringing years of experience and a proven track record to the table. When you partner with us, you gain access to:

• Expertise in Company Law: Our solicitors are well-versed in the intricacies of company law, allowing us to identify situations where winding up petitions are the most effective course of action. We understand the nuances of unpaid debts, contractual obligations, and the legal remedies available to creditors.

• Strategic Approach: Crafting a compelling winding up petition requires careful planning and strategy. We take the time to analyse your specific case, gathering evidence and building a strong legal argument to present in court. Our goal is to maximise your chances of success and secure the outcome you deserve.

• Customised Solutions: Every business dispute is unique, and we tailor our approach to fit the specific needs of your case. Whether you are a creditor seeking repayment or a company facing financial distress, we have the expertise to guide you through the legal process.

• Negotiation Skills: In some cases, negotiation can lead to a favourable resolution without the need for winding up. Our solicitors excel in negotiation, working tirelessly to reach settlements that protect your interests and maintain business relationships whenever possible.

• Courtroom Prowess: When litigation becomes necessary, our solicitors are seasoned advocates in the courtroom. We are well-prepared to present your case with precision and confidence, striving for the best possible outcome.

There is an absolute importance in gaining the advantage of having legal experts who specialise in winding up petitions by your side. Without specialist knowledge and experience, creditors will find it challenging to recover their debts and companies facing financial difficulties may miss out on potential solutions and we have the knowledge and expertise to do just that.

In the world of business, disputes can arise unexpectedly, and unpaid debts can pose a significant threat to your company’s financial stability. When faced with such challenges, having a specialised law firm like LEXLAW Solicitors & Barristers on your side can make all the difference. Whether you are a creditor seeking to recover a debt or a business facing financial challenges, we offer expert legal guidance to navigate this intricate process. Contact us to today to allow us to help you every step of the way.