Part 14 - Partnership winding-up petitions
September 1997
This part is set-out as follows:
Part 14A - Winding up on a creditor's petition where no concurrent petition is presented against a member
Part 14B - Winding up on creditor's petition where concurrent petition(s) presented against member(s)
Part 14C - Winding up on member's petition where no concurrent petitions presented against member
Part 14D - Winding up on member's petition where concurrent petitions are presented against all members
Part 14A - Winding up on a creditor's petition where no concurrent petition is presented against a member
45.153 Modifications to the Act
Part V of the Insolvency Act 1986 as modified by article 7 of the Insolvent Partnership Order applies to the winding up of a partnership where no concurrent petitions are presented against member(s) i.e. where the petition is presented by a creditor or a responsible insolvency practitioner or the Secretary of State or any other person other than a member and no petition is presented by the petitioner against a member or former member.
45.154 Winding up of partnerships as unregistered companies
Any insolvent partnership may be wound up as an unregistered company if it has, or at any time had, in England and Wales either [Note 1]:
a. a principal place of business; or
b. a place of business at which business is being or has been carried on in the course of which the debt (or part of the debt) arose which forms the basis for the petition for winding up of the partnership.
The above is subject to two exceptions:
i. where the business has not been carried on in England and Wales at any time during the three years prior to the presentation of the petition; or
ii. where the principal place of business is situated in Scotland or Northern Ireland, unless the partnership had a principal place of business in England and Wales during the period of one year, where the principal place of business is in Scotland, (or three years for Northern Ireland) before the presentation of the petition.
Subject to the above (paragraph 45.154), the High Court may wind up any partnership as an unregistered company, and the county court may wind up any partnership as an unregistered company whose principal place of business is (or was) in its insolvency district [Note 2].
45.156 Who may present a petition
Apart from a creditor or the Secretary of State, the petition may be presented by an insolvency practitioner who is [Note 3]:
a. the liquidator or administrator of a corporate member (or former member); or
b. the administrator of the partnership; or
c. the trustee of an individual member’s (or former member’s) estate; or
d. the supervisor of a voluntary arrangement of a corporate member or the partnership of an individual member, where the petition is presented on one of the grounds set out at paragraph 45.157.
45.157 Grounds for the petition
The circumstances in which a partnership can be wound up as an unregistered company are [Note 4]:
a. where the partnership is dissolved, or ceases to carry on business, or is carrying on business only for the purposes of winding up its affairs; or
b. where the partnership is unable to pay its debts; or
c. where the court is of the opinion that it is just and equitable that the partnership shall be wound up.
45.158 Inability to pay debts - insolvent member
Where an insolvency practitioner is trustee or liquidator of a member, and he presents the petition and is able to satisfy the court that the insolvency order was made against the member because of that member’s inability to pay a joint debt, a partnership is considered to be unable to pay its debt unless it is proved otherwise [Note 5].
45.159 Inability to pay debts - demand for payment
An insolvent partnership is also deemed unable to pay its debts if there is a creditor (by assignment or otherwise) to whom the partnership owes a sum greater than £750 then due and [Note 6]:
a. the creditor has served on the partnership a written demand in the prescribed form requiring payment; and
b. the partnership has failed to pay or secure the debt within three weeks of service.
Service of the demand is to be effected [Note 7]:
a. by leaving it at the principal place of business; or
b. by leaving it at a place of business at which business is carried on in the course of which the debt (or part of the debt) arose; or
c. by delivering it to an officer of the partnership; or
d. by otherwise serving it in such a manner as the court may approve or direct.
‘Officer’ is defined by article 2, paragraph 1 of the Insolvent Partnerships Order 1994 as a member or a person who has control or management of the partnership business. It follows that the ‘officer’ does not need to be a partner.
45.161 Inability to pay debts - debt remaining unsatisfied after action brought
A further test of deemed inability to pay debts which is specific to unregistered companies, and is modified by Schedule 3 of the Insolvent Partnerships Order, is where an action or other proceeding has been instituted against any member for any debt or demand due, or claimed to be due, from the partnership or from him in his character as member and [Note 8]:
a. notice in writing of the institution of the action or proceeding has been served on the partnership; and
b. the partnership has not within three weeks after service of the notice paid, secured, or compounded for the debt or demand, or procured the action to be stayed, or indemnified the defendant to his reasonable satisfaction against the action, costs, damages and expenses to be incurred by him because of it.
Service provisions for such notice are as detailed at paragraph 45.160 above.
Part 14B - Winding up on creditor's petition where concurrent petition(s) presented against member(s)
45.163 Modifications to the Act
Where there are concurrent petition(s) presented by the petitioner against the partner(s) in their capacity as member(s), Part V of the Insolvency Act 1986 is applied (subject to modifications) by article 8 of the Insolvent Partnerships Order (other than sections 223 and 224) to the winding up of an insolvent partnership as an unregistered company on a creditor’s petition.
Because article 8 envisages concurrent petitions against both corporate and individual members, other parts of the Insolvency Act are also applied subject to modification.
All the provisions of article 8 are further modified, so that reference to members also includes former members against whom an insolvency petition is being or has been presented by virtue of article 8.
Section 117 of the Act, relating to court jurisdiction, is modified by article 8 of the Insolvent Partnerships Order in the same way as article 7 (paragraph 45.155) but in addition the court has jurisdiction to wind up a corporate member or make a bankruptcy order against an individual member of a partnership of which a petition has been presented where it has jurisdiction to wind up the partnership, subject to the following paragraph [Note 9].
45.166 Petitions to be in same court
Any application to court by virtue of article 8 for the winding up of a partnership as an unregistered company and the liquidation or bankruptcy of one or more members shall be presented to the same court and, unless the court otherwise directs, on the same day and except in the case of a petition against an individual member, must be advertised [Note 10].
At any time after the presentation of the petition, the petitioner, with leave of court, may add other members or former members as parties to the proceedings in relation to the insolvent partnership [Note 11].
45.168 Winding up as an unregistered company - grounds
Section 221 is modified by article 8 of the Insolvent Partnerships Order in the same way as article 7 detailed above (paragraph 45.155) except that the only ground that the partnership can be wound up under article 8 is that it is unable to pay its debts (and not the other two grounds set out in paragraph 45.157).
For the purposes of the modified section 221, an insolvent partnership is deemed unable to pay its debts if there is a creditor (by assignment or otherwise) to whom the partnership is indebted for £750 or more then due, and [Note 12]:
a. the creditor has served (in the manner specified at paragraph 45.170) on the partnership a written demand in the prescribed form for payment of the sum due,
b. the creditor has also served on any one or more members of the partnership liable to pay the sum due (in the case of a corporate member by leaving it at its registered office, and in the case of an individual member by serving it in accordance with the rules (paragraphs 45.95 to 45.100) a demand in the prescribed form requiring the member(s) to pay the sum due, and
c. the partnership and its members, within 3 weeks of the last of them to be served, have failed to pay the sum or to secure or compound it to the creditor’s satisfaction.
45.170 Service of the demand on the partnership
Service of the demand on the partnership shall be effected [Note 13]:
a. by leaving it at the principal place of business of the partnership in England and Wales, or
b. by leaving it at a place of business at which business is carried on in the course of which the debt (or part of the debt) arise,
c. by delivering it to an officer of the partnership, or
d. by otherwise serving in such a manner as the court may approve or direct.
‘Officer’ is as noted at paragraph 45.160.
45.171 Circumstances in which members may be wound up or made bankrupt
A corporate member may be wound up by the court if it is unable to pay its debts (the six other grounds in section 122 are excluded). Where a petition for the winding up of the partnership has been presented under article 8, a creditor’s petition against an individual member must be in respect of one or more joint debts owed by the insolvent partnership and the petitioning creditor or each of them must be a person to whom the debt or at least one of the debts is owed. A creditor’s petition may be presented in respect of a joint debt or debts only if, at the time the petition is presented [Note 14]:
a. the total debt(s) is equal to or exceeds the bankruptcy level (presently £750),
b. the debt(s) is for a liquidated sum payable to the petitioning creditor (or one or more of them) immediately and is unsecured,
c. the member is liable for the debt(s) and appears unable to pay, and
d. here is no outstanding application to set aside the statutory demand served in respect of the debt or any of them.
45.172 Inability to pay debts - corporate member
A corporate member is deemed unable to pay his debts if there is a creditor (by assignment or otherwise) of the partnership owed more than £750 then due for which the member is liable and [Note 15]:
a. the creditor has served on that member and on the partnership a written demand, in the prescribed form, requiring payment of the sum due, and
b. the corporate member and the partnership have not paid, secured or compounded for the debt within 3 weeks of service of the demand.
Service of the demand on the corporate member is by leaving at the registered office. Service on the partnership is as described at paragraph 45.170.
An individual member appears unable to pay a joint debt for which he is liable if the debt is payable immediately and the petitioning creditor has served [Note 16]:
a. on the individual member a statutory demand in the prescribed form and in accordance with the rules, and
b. on the partnership, a written demand in the same form,
requiring payment by the individual and the partnership and the debt has neither been paid, secured for or compounded nor the demand against the member set aside within 3 weeks of the latest service. Service of the statutory demand on the partnership is as described at paragraph 45.170. Service of the statutory demand on the individual member is in accordance with the rules (paragraphs 45.95 to 45.100).
45.174 Details to be in the petition
Forms for the appropriate petition to be presented against the partnership and its members are contained in Schedule 9 of the Insolvent Partnerships Order. Each petition should contain particulars of other petitions being presented in relation to the partnership, identifying the partnership and the members concerned [Note 10].
On the day of the hearing of the petition against the partnership the petitioner is required to complete and hand to the court a progress report in Form 9 giving details of the current position of the various petitions being presented [Note 17].
A petitioner may withdraw his petition if [Note 10]:
a. he withdraws all other petitions which he has presented by virtue of article 8 and
b. he gives at least 3 days notice prior to the hearing of his intention to the court.
Subsection (a) above does not apply if the petitioner convinces the court on application that because of problems with serving the petition against an insolvent member the continuance of that petition would be likely to cause prejudice or delay to the proceedings on the other petitions which he has presented.
45.177 Substitution of petitioner and change of carriage
Where notice of withdrawal is given the court may, subject to such terms as it thinks fit, substitute as petitioner in respect of both the partnership and the members’ petitions any creditor who would have the right to present the petitions. If this occurs the petitions will not be withdrawn. This provision includes a change of carriage of the petition [Note 10].
45.178 Attendance at the hearing
Any member of the partnership (whether or not a petition has been presented against them) may attend and be heard on the petition for the winding up of the partnership [Note 10].
The hearing of the petition against the partnership must be in advance of the hearing of any petition against an insolvent member [Note 10].
Subject to the following paragraph, on hearing a petition against an insolvent partnership or any of its members, the court may dismiss it or adjourn the hearing conditionally or unconditionally or make any other order that it thinks fit. An order in respect of an insolvent partnership may contain directions as to the future conduct of any insolvency proceedings existing against any insolvent member [Note 18].
45.181 Hearing of the petitions against members
On hearing the petitions against the members, the petitioner must draw the court’s attention to the outcome of the hearing of the winding-up petition against the partnership [Note 19].
45.182 - Where no winding-up order against partnership
Where there has been no winding-up order made against the partnership, but the petition has not been dismissed, the court may adjourn the hearings against the insolvent members until either event has occurred.
45.183 - Where partnership wound up
Where a winding-up order was made against the partnership, the court may make insolvency orders against the members, but where this does not happen within 28 days of the order against the partnership, the winding up of the partnership must be conducted as if no concurrent petitions had been presented (i.e. under article 7 as detailed above) and the proceedings against the members must be conducted under the Insolvency Act 1986 with no modifications (other than those made to sections 168 and 303 by article 14).
45.184 - Where petition against partnership dismissed
Where the petition against the partnership was dismissed, the court may dismiss the petitions against the members. Where, however, the court does make an order against a member, the insolvency shall be conducted in accordance with the unmodified Insolvency Act 1986 (other than those made to sections 168 and 303 by article 14).
45.185 Dismissal of petition against member
The court may dismiss a petition against any insolvent member if it considers
it just to do so, because of circumstances having changed since the making of the winding-up order against the partnership. This provision is intended to deal with the situation where the debt on which the winding-up petition had been based has been paid in full prior to the hearing of the bankruptcy petitions. The court may dismiss a petition against any insolvent member who is a limited partner if [Note 19]:
a. the member lodges in court sufficient money or security to meet his liability for the debts; or
b. the member satisfies the court that he is no longer under any liability in respect of the debts and obligations of the partnership.
Part 14C - Winding up on member's petition where no concurrent petitions presented against member
Where a petition to wind up an insolvent partnership is presented by a member, and where no concurrent petitions are presented against the members, the Insolvency Act 1986 is modified under article 9 of the Insolvent Partnerships Order so that the following provisions of the Act apply:
a. sections 117 and 221 as modified by schedule 5, and
b. other provisions of part 5 of the Insolvency Act as modified by part 1 of schedule 3 to the Insolvent Partnership Order.
The High court has jurisdiction to wind up any insolvent partnership as an unregistered company by virtue of article 9 of the Insolvent Partnerships Order if the partnership has or had a principal place of business in England and Wales [Note 20].
The county court has similar jurisdiction where the partnership has or at any time had a principal place of business within the insolvency district of that court. But subject to the caveats set out in paragraph 45.154.
45.188 Circumstances in which a partnership maybe wound up
The circumstances in which an insolvent partnership may be wound up as an unregistered company where a petition is presented by the members, but no concurrent petitions are presented are [Note 21]:
a. the partnership is dissolved, or has ceased to carry on business, or is carrying on business only for the purposes of winding up its affairs;
b. if the partnership is unable to pay its debts; or
c. if the court is of the opinion that it is just and equitable that the partnership be wound up.
45.189 Who may present a petition
A member’s petition for winding up an insolvent partnership may be presented by [Note 22]:
a. any member, where the partnership consists of not less than 8 members or
b. any member (with leave of court), if the court is satisfied that the member has served a demand in respect of a joint debt exceeding £750, then due by the partnership but which has been paid by that member, otherwise than out of partnership property; the partnership has not paid within 3 weeks of service; and the member has obtained a judgment, decree or other order of the court for reimbursement of the joint debt and all reasonable enforcement steps have been taken.
Part 14D - Winding up on member's petition where concurrent petitions are presented against all members
45.190 Modifications to the Act
Where a petition to wind up the partnership as an unregistered company is presented by a member, and concurrent petitions are presented against all members in their capacity as such, the Insolvency Act is modified under article 10 of the Insolvent Partnerships Order so that the following provisions of the Act apply:
a. sections 117, 124, 125, 221, 264, 265, 271 and 272 as modified by schedule 6, and
b. sections 220 (as modified by schedule 4) 225 and 227 to 229 in part V.
Under article 10 the High Court has jurisdiction to wind up any insolvent partnership which has (or had) a principal place of business in England and Wales. Similarly, a county court has jurisdiction where the principal place of business is (or was) within its insolvency district [Note 23]. This is subject to the same exceptions relating to timing of business and to businesses in Scotland or Northern Ireland as detailed at paragraph 45.154 above.
The court has jurisdiction to make a bankruptcy order against an individual member or to wind up a corporate member if it has jurisdiction in respect of the partnership [Note 23].
45.192 Grounds for and presentation of petition
A petition under article 10 may only be presented by a member where the partnership is unable to pay its debts and [Note 24]:
a. petitions are presented at the same time by that member for insolvency orders against every member (including himself/herself or itself); and
b. the petition against each member contains a statement that the member is willing to have an insolvency order made against him/her.
However, where the court is satisfied on application by a member that presentation of all the petitions as required is impracticable e.g. because of problems of service, then it may direct that petitions be presented against the partnership and whichever members are specified by the court. Petitions are all to be presented to the same court and, unless the court otherwise directs, on the same day and (except for a petition against an individual member) should be advertised.
45.193 - Contents of the petition
Each petition shall contain details of the other petitions being presented in relation to the partnership [Note 25].
45.194 - Timing of the hearing
The hearing of the petition against the partnership must be in advance of the hearing of the other petitions [Note 26].
On the day of the hearing the petitioner is required to complete and hand to the court a progress report giving details of the current position of the various petitions being presented [Note 27].
45.196 - Attendance at the hearing
Any person against whom a related winding-up or bankruptcy petition has been presented is entitled to be present and heard at the hearing to wind up the partnership [Note 28].
45.197 - Withdrawal of the petition
Withdrawal provisions are similar to those detailed at paragraph 45.176 [Note 29].
45.198 Powers of Court at hearing
Subject to paragraph 45.199, on hearing a petition against the partnership or any of its members the court may dismiss it, or adjourn the hearing conditionally or unconditionally or make any other order that it thinks fit. The order may contain directions as to the conduct of any insolvency proceedings in existence against any insolvent member [Note 30].
45.199 Hearing of petitions against members
Section 125A, as inserted, deals with what may happen at the hearing of concurrent petitions presented against members and is as detailed at paragraphs 45.181 to 45.185 [Note 31].
[Back to Part 13 – Partnerships generally] [On to Part 15 – Individual partner and member petitions]