Pay or we will look at winding you up. This is a threat that many debt collectors and credit controllers use as a means of persuading an errant debtor to pay. However, at PBC we ask if those threatening such action appreciate the impact of winding up proceedings, both practically and in terms of petition costs that could be in the region of £6-8,000.
Before a petitioner can seek to recover their petition costs as a liquidation expense, the statutory fees must be fully repaid. These include the official receiver’s fixed administration and general fees of £5,000 and £6,000 respectively. Equally, the official receiver shall levy a 15% fee on any assets they realise.
In a recent report from the Insolvency Service an average of 10% of all compulsory liquidations over the past 5 years resulted in the official receiver fees being fully covered. There can be many reasons for this but, ultimately it is suggesting in 90% of compulsory liquidations, the petitioner is writing off the petition costs they have paid out in addition to their original debt.
There are times where winding up proceedings are justified. However, a petitioner should also be aware of (and open to) the alternatives that are available. This maybe creditors voluntary liquidation, where a wider degree of commercial thinking is often employed. It could also be some form of restructuring that benefits creditors as a whole. Often, the likes of a company voluntary arrangement will provide to repay the petition costs as an expense while the CVA, itself, offers a better return on your principal debt.
It goes without saying that everyone wishes to be paid for their services or goods supplied. However, when a company is likely to enter into an insolvency event, reality turns on the question how do I maximise recovery and does any alternative option being made available achieve that?
If you require any advice or assistance on any insolvency-related issue, then please contact PBC Business Recovery & Insolvency to discuss your situation on 01604 212150 (Northampton), 01908 488653 (Milton Keynes) or email to email@example.com. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.