Explain procedure which must be adopted to make an individual insolvent and to compulsorily wind up a company

Disadvantage of litigation

Could take weeks or months to obtain judgment
Cost unlikely to be recovered in full
Entering judgment does not guarantee payment
Judgments can be ignored
Litigation is stayed if debtor becomes bankrupt/ is wound up and client ranks as unsecured creditor

	Personal Insolvency	Corporate Insolvency
Initiating	Statutory Demand s.267 IA 1968 owed more than 750 liquidated sum debtor appears unable to pay or there is no reasonable prospect of being able to pay R6 IR 1986	Don’t need statutory demand can just write a letter saying co can’t pay debts as fall due and threatening winding up proceedings
When it can be used?	s.268 – statutory demand served and debtor failed to comply judgment obtained against debtor, creditor has attempted to enforced the judgment and remains wholly or partially unsatisfied	S.122(f) company unable to pay debts S.123 above shown if Statutory demand unpaid Judgment and enforcement unsatisfied Co unable to pay debts as fall due Value of co assets less than liability Debt must be 750 or more and at least 750 undisputed
Docs & Service?	Must do all that reasonable to bring statutory demand to attention of Debtor R 6.1 must do what’s reasonable to bring to debtor’s attention (ie personal service) R6.3 – personal service Recorded delivery/personal service are best	Use prescribed Form 4.1 IR 4.8 served at registered office or director, officer, employee, someone authorised to accept service, leaving it so likely to come to the attention of someone attending there effect on debtor Use personal service or recorded service as easier to prove proper service
Effect on debtor	If unpaid for 21 days (starting day after service) then can petition for Debtor bankruptcy provided debtor doesn’t apply to set it aside. Debtor can apply to have set aside within 18 days.	Have 21 days to pay (if don’t, deemed unable to pay s.123(1)(a) IA 1986 Ground for presenting winding up petition
Advantage for creditor	Inexpensive, relatively quick – more likely to initiate response/payment Quicker than court proceedings IF Debtor pays without having to petition for bankruptcy	Inexpensive process, threat of bankruptcy usually means likely to get paid Effect of winding up petition under s 127 IA 1986 any disposition of property will be void unless court orders otherwise’ which means company cannot trade without ‘validation’ order Will constitute an event of default which will trigger default of other finance agreements
Risk to Claimant	Debtor can’t pay and goes bankrupt – Creditor becomes unsecured creditor and will get little or no money	If they rank as unsecured creditor may only get a proportion or money owed or nothing at all
Other	Debtor can apply to have the demand set aside: Counterclaim, set-off or cross demand which equals or exceeds the debt Debt is disputed on substantial grounds Creditor holds some security in respect of debt which equals/exceeds full amount Court satisfied, on other grounds, that demand ought to be set aside.	Winding up petition: Advertisement Creditor to advertise petition in London Gazette 7 days after presentation + 7 days before hearing to alert other creditors What can debtor do in response? Apply for injunction to prevent advertising or presenting petition (if dispute on reasonable grounds) What can creditors do? Support or take over winding up petition Risk: becomes public, other creditors may join in. If unsecured, may end up with little or nothing.

Advise a client who is faced with one of the above procedures on how debtor can respond and their options WS 9

Petition

Can request to set aside within 18 days of service

Use prescribed form plus affidavit

Counterclaim, set off or cross demand which equals/exceeds the debt
Debt is disputed on substantial grounds
Creditor hols some security in respect of debt which equals/exceeds full amount
Court satisfied, on other grounds, that demand ought to be set aside

No procedure to set aside demand as no demand BUT can apply injunction if petition would be an abuse of process

Select in a given situation, the tactical steps which you could take on behalf of a client and explain why these steps are appropriate

Reasons for debtor resisting claim

D can pay but is stalling for time

Debtor can’t pay full amount

D doesn’t think they owe full amount and will resist paying

D is overdrawn but director of D co gave personal guarantee

Advice to Claimant

Corporate insolvency

Undisputed amount of 750 or more,

Piper will WANT to pay, and they CAN pay.

They won’t they bad publicity/potential of going insolvent if they owe other creditors/ might make it difficult for them to trade/

Insolvency procedure takes time and costs money

Could affect their trade and will be unable to trade without order from the court.

Less time consuming and costly than claim form and summary judgment

Claim Form + Summary judgment

No defence with real prospect of success, Claimant gets a quick judgment, can take enforcement action and become a secured creditor (third party debt order on bank account and balance on charging order)

Don’t want to do use corporate insolvency as will tell other creditors that Debtor doesn’t have enough money to pay everyone

Risks: bankruptcy/winding up petition by another creditor – proceedings stayed and enforcement proceeding void and costs wasted

Claim Form + Interim payment

Disputed debt but at least 750 undisputed, best option to try and get some money while D and C argue/go to trial over full amount due

Must have met grounds under 7.1 a) that debtor has admitted to pay liability to pay damages.

(no reason not to go for summary judgment at same time as procedure and time limits are the same that claimant has claim with no real prospect of success or defence)

Personal insolvency

D must have some assets otherwise you wouldn’t have accepted the personal guarantee.

Company is overdrawn so proceed on the guarantee. He can apply to have it set aside.

Advice to Defendant

Pay the debt now before a winding up petition is issued to prevent bad publicity

Attempt to negotiate with creditor

Accept payment by instalment and higher interest rate

Could offer security if repayable within 2 years otherwise voidable as preferential treatment of creditor

Negotiate over the amount due

Or payment over period of time

We can’t advise D personally as we represent company (O3.5 conflict of interest) tell the director to go and get independent advice

We can continue to represent company.

Advise a client on the grounds for interim applications – summary judgment, interim payments, applications to strike out a statement of case and security for costs.

Interim Application	Strike out statement of case	Claim Form +Summary Judgment CPR 24.2	Claim Form + Interim Payment CPR 25.7	Security for costs (Defendant only!) CPR 25.13
When should it be used	When there isn’t any legal basis for the other party’s case	When the opposing parties case isn’t very strong *Can be used where amount of the claim is uncertain because can get judgment for damages to be assessed	When you want to force D to make an early payment of damages	When D is worries that C will not be able to pay costs Defendant against Claimants or Part 20 Defendant against Pt 20 Claimant
Grounds	CPR 3.4 – strike out statement of case on grounds that: 1. it discloses no reasonable grounds for bringing/defending claim 2. it abuses courts process	CPR 24.2 Claim has no real prospect of success 24.2(a)(i) Defence has no real prospect 24.2(a)(ii)	CPR 25.7(1) (a) D admitted liability to pay damages (ie in previous correspondence) ; or (b) C has obtained judgment against D for damages to be assessed ( ie SJ); or (c) C would obtain judgment of a substantial amount of money if went to trial COURT has discretion	Court must be satisfied that it is just to make such an order, plus one of the CPR 25.13(2) grounds: 1. C is resident outside of the EU (company or individual) 2. C is a company and there is reason to believe that it will be unable to pay D costs if ordered to do so (impecuniosity ground) Must provide detailed breakdown of costs incurred to date and those likely to be incurred (discretionary)
Procedure 1. Try to resolve with other side first OO 2. Serve N244 with WS (CPR 24.7) on party at least 3 days before hearing (CPR 23.7(1) – unless other time limits given		CPR 24.2 (1)(a) D has to file ack of service or defence 24.4(3) C must give 14 days notice of hearing +issue to be decided 24.5(1) D can serve evidence at least 7 days before hearing 24.5(2) C can serve response at least 3 days before hearing	Wait until end of period for filing acknowledgement of service (25.6(1) CPR 25.6(3) application notice and evidence served at least 14 days before hearing CPR 25.6(4) D may serve written evidence in response at least 7 days before hearing CPR 25.6(5) C respond by written evidence before hearing	C must provide Bank guarantee Pay money into court Pay money into joint account held by parties solicitor By a particular date
Other	Adv ...

#13636 - Tactics Of Insolvency Procedures And Interim Applications - Commercial Dispute Resolution

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