Contributory Winding Up Petitions – To advertise or not to advertise? The solution is in the rules

Pursuant to section 79 of the Insolvency Act 1986 (“IA 1986”), a contributory is defined as “every person liable to contribute to the assets of a company in the event of its being wound up”.

Commonly, contributories are company members holding fully paid-up shares, but contributories can also be members with partly paid-up shares. In certain circumstances, contributories may seek to wind up the company, either on the basis that the company is unable to pay its debts (s.122(1)(f) IA 1986) or, where there is a deadlock between the members of a company or the number of members of a company falls below two, contributories may seek to wind up the company on the basis that it is just and equitable to do so (s.122(1)(g) IA 1986).

In terms of the process of winding up a company, advertising a winding up petition is a key consideration. The usual position on presentation of a winding up petition is that unless the court directs otherwise, a petitioner must give notice of the winding up petition (rule 7.10(1) IR 2016) and notice of the petition must be advertised in the London Gazette (7.10(3) IR 2016).

Rule 7.4(1) of the Insolvency Rules 2016 (“IR 2016”) applies Chapter 3 IR 2016 to winding up petitions presented by contributories, subject to rule 7.25 IR 2016.

Rule 7.25 IR 2016 sits within Chapter 4 IR 2016, which is applicable specifically to winding up petitions brought by a contributory. Rule 7.25(1) IR 2016 sets out which rules in Chapter 3 apply, with necessary modifications, to a winding up petition brought by a contributory. Importantly, rule 7.10 IR 2016 which specifies that the petition must be advertised in the London Gazette, is not included in the list at rule 7.25 IR 2016.

As such, rule 7.25 IR 2016 does not apply rule 7.10 on advertisement to petitions brought by contributories. This is supported by the judgment of HHJ Mithani KC in John Leslie Taylor v The Whitehall Partnership Limited, Joanne Taylor [2023] EWHC 596 (Ch), whereby the judge confirms that “unlike a petition presented by a creditor, a petition brought by a contributory does not need to be advertised unless the court directs that it should be”. The Judge considered that it would be very unusual for a court to make such an order.

Pursuant to the provisions of IR 2016 and the judgment of HHJ Mithani KC which reflects the statutory position, a winding up petition presented by a contributory does not need to be advertised and gazetted as rule 7.10 IR 2016 does not apply.

Our Restructuring and Insolvency team has considerable experience in advising businesses, directors and individuals facing financial distress. Should you require any assistance in respect of contributory winding up petitions or any other relevant matter, please contact any one of our partners in the Restructuring & Insolvency team. We are experts in this field and are here to help.

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