EG 13.3 1Petitions for administration orders or compulsory winding up orders: determining whether a company or partnership is unable to pay its debts

EG 13.3.1

1The FCA can petition for an administration order or compulsory winding up order on the grounds that the company or partnership is unable (or, in the case of administration orders, is likely to become unable) to pay its debts. The FCA does not have to be a creditor to petition on these grounds.

EG 13.3.2

1Under sections 359 (Petitions) and 367 (Winding up Petitions) of the Act, a company or partnership is deemed to be unable to pay its debts if it is in default on an obligation to pay a sum due and payable under an agreement where the making or performance of the agreement constitutes or is part of a regulated activity which the company or partnership is carrying on.

EG 13.3.3

1The FCA would not ordinarily petition for an administration order unless it believes that the company or partnership is, or is likely to become, insolvent. Similarly, the FCA would not ordinarily petition for a compulsory winding up order solely on the ground of inability to pay debts (as provided in the Act), unless it believes that the company or partnership is or is likely to be insolvent.

EG 13.3.4

1While a default on a single agreement of the type mentioned in paragraph 13.3.2 is, under the Act, a presumption of an inability to pay debts, the FCA will consider the circumstances surrounding the default. In particular, the FCA will consider whether:

  1. (1)

    the default is the subject of continuing discussion between the company or partnership and the creditor, under the relevant agreement, which is likely to lead to a resolution;

  2. (2)

    the default is an isolated incident;

  3. (3)

    in other respects the company or partnership is meeting its obligations under agreements of this kind; and

  4. (4)

    the FCA has information to indicate that the company or partnership is able to pay its debts or, alternatively, that in addition to the specific default the company or partnership is in fact unable to pay its debts.