The issue of legal costs in a winding up petition very much depends on the outcome of the process – such as if the petition was disputed, dismissed by consent or the company wound up. Our expert team has dealt with thousands of petitions since 2002. We can advise you on the subject of legal costs and much more.
How costs are normally dealt with
The court has a discretion to make whatever costs order it feels fit in any particular case, including in winding up proceedings.
However, the normal costs orders the court would make in winding up petition cases are as follows
- If a winding up order is made, then the court would normally order that the petitioning creditor is awarded their costs out of any assets of the company which the liquidator subsequently collects. This is known as the “usual compulsory order”;
- If a petition is dismissed because the creditor has failed to comply with the various procedural requirements set out in the Insolvency Rules, then they petitioning creditor is unlikely to recover its costs;
- If a petition is dismissed because a debtor has paid the debt due under the petition, then as long as the petition has been advertised, the petitioner is usually able to recover its costs. In practice, the petitioning creditor will normally insist that its costs are paid by the debtor company before agreeing to dismiss or withdraw the winding up petition;
- If the winding up petition fails, then the petitioning creditor will normally be ordered to pay the company’s costs.
- If the parties cannot agree costs among themselves, then they can go to detailed assessment. The court do not generally have time to deal with costs as part of the winding up petition list, so issues in relation to costs will be dealt with at separate hearings.
The FWJ approach can mean the debtor pays all the legal costs
Winding up petition court fees and costs are often misunderstood and much of the original court fee can be recovered after the end of a case. Our expert team can help advise.
There are two sets of costs you will incur when instructing law firms to collect debts – their own time costs and “disbursements” such as court fees. However, we are different in many ways.
How we are different to other law firms
Over 50% of our clients end up paying nothing at all in legal fees – this is because where we issue a winding up petition for a client, we often recover the winding up petition debt and legal costs in full from the debtor.
This means that the debtor is actually paying all the legal costs – with the net effect that in over 50% of our cases the client pays nothing at all!
Our FWJ time costs
We operate a highly competitive costing offering to our clients which we do not believe any other law firms offer. If you wish to learn more about our costs then please follow this link on our website for our full debt recovery pricing model – including winding up petitions.
Disbursements
In addition to our time costs, there are “set” fees which also need to be paid as part of the process.
These consist of:-
- the winding up court issue fee – £302.
- The official receivers deposit – £2,600 (of which £2,550 is the refundable official receivers deposit if the debtor is not wound up).
- process server fee £100- £150 (approx).
- advertisement fee in the London Gazette (if required) – £80.
- barrister’s costs for attending court (if required) – £150 – £200 plus VAT (approx).
Court fees do change from time to time so you can keep up to speed with them at the government court fee website.
Understanding more about the court fee and official receiver deposit
With regard to the winding up court issue fee this is £302.
However, you also have to pay what is known as the Official Receivers liquidation deposit to get a petition issued. That is £2,600. However, it is important to understand that if the debtor is not later wound up (for example the debtor pays up or is clearly insolvent and you don’t want to wind them up) you will receive back from the court £2,550 of the original £2,600 deposit.
Therefore, the net cost of the court fee for issuing a winding up petition if a company is ultimately not wound-up in terms of the court fee is much lower – £302 + £50.
the reason for the official receiver deposit is that if the company is wound up, the money can be used by the official receiver (the government appointment liquidator) to undertake investigations into the liquidated company and those involved in the management of it.
If the company is not wound up – it is handed back to the creditor who issued the petition.
However, it must always be remembered that the purpose of a winding up petition is for a creditor is to try and obtain payment of the winding up petition debt. It is the threat of the winding up petition rather than the actual winding up of the company which results in payment.
We would not always recommend that a company is wound up if it is clear the debt is not going to be paid.
By not winding up the company, you would receive back the deposit of £2,550 thus reducing your costs greatly.
It normally can take a few weeks to for the winding up petition deposit to be returned to the petitioning creditor or their solicitors, but if the delay is lengthy, you can contact the estate accounts and scanning team of the insolvency service to try and speed up the process.
The deposit fee paid to the official receiver has changed over the years (the last rise meaning it is now £2,600).
As such, it is worth checking what the current deposit is before issuing any winding up petition as the liquidation deposits do rise.
The rules relating to the winding up petition deposit and costs is set out in Article 2 of the Insolvency Proceedings (Fees) order (SI 2016/692).
