There must be sound claim that the business will not and is incapable of paying back the debt before the application is filed with the court. All who are due monies can file this document. The creditor's goal with filing is to receive payment directly or through liquidation of the debtor's assets.

Before filing this document, it is recommended that a lawyer be consulted. If the creditor is found to have filed the petition in error, he or she could be held responsible for any court costs. The creditor must believe that the company does not have the ability to pay.

Invoices, legal requests, and contracts with collection companies are all valid proof that a vendor has exercised the needed energy to collect on the debt. The court will evaluate the claim and when found to be valid the debtor will be notified. Public notifications will be made in the newspaper. By so doing other vendors will be alerted to the petition. Additionally the banks will have been notified and the organizations accounts may be put on hold.

Directors may choose to pay the claim. This will require cash to be taken from another area in the business which can have unwanted consequences. If the entity is cash poor this option is irrelevant. Another option at this time is to choose to argue the reasonableness of this request. Arguing will mean legal services will have to be obtained and costs will be incurred for the services. Banks can be solicited to keep the accounts liquid but they are not obligated to do so. If the court does deem the debt valid and it is not paid or contested, the process of liquidation can proceed.

A court ordered company will be assigned to liquidate the debtor's company assets. It is through this process that creditors are expecting to be paid. The directors of the liquidated company will also be investigated. If any are found to have continued accruing debt with knowledge that the entity could not pay, they may be liable for payment on some debt and will have to relinquish any other director's position they hold with other companies.

Other than payment of debt and insolvency, the company has a couple of other choices. They can file a voluntary liquidation, giving them some say over who does the liquidating of assets. Another choice, called pre-pack liquidation, deems there is future worth in the company. A new entity can be created to buy the assets of the old and the old company is allowed to be wound up.

Be aware that the company being filed against does have options that the creditor does not. The burden of proof of collection and belief of insolvency ride on the petitioner. Winding Up Petitions and Corporate Insolvency are legal proceedings and legal counsel is advised before giving an application to the court. Spend some time browsing the web to make sure your choice is wise.

If a business is identified as unable to cover all the obligations, it must declare a condition of corporate insolvency. The winding up petition helps to identify remaining obligations and how they must be resolved.

The director of these companies, Nicholas Buchanan, had previously controlled another company called Abacrombie and Co Ltd, which was wound up last year after an earlier investigation by the Service’s Companies Investigation Branch (CIB) found that it had been charging excessive fees, did not have a clear pricing structure, and that there was a lack of commercial benefit to its clients.

While this winding up was pending, Buchanan gave undertakings to the Court not to engage any new clients and to pay any funds received from existing clients into a specified bank account. However, the investigation found that just days after agreeing to these restrictions, he established a new company, Advanced Bankruptcy Recovery Ltd (ABR), to continue the same business.

A further investigation by CIB found that the new company collected £139,000 in fees from new and existing clients and paid them into unrelated bank accounts, including an account held by OPINW Limited, an otherwise dormant company which had previously operated as a property developer.

Both companies failed to produce accounting records to explain expenditure, in particular cash withdrawals of more than £64,000, and various transfers, which were made for the personal benefit of Mr Buchanan.

Insolvency Service chief executive, Stephen Speed, said: "The previous company controlled by this director operated with a complete lack of financial transparency, charging up to £44,000 for its financial services and receiving more than £2 million in fees from its 530 clients. Once action was taken to wind up this company, the director ignored his own undertakings to the High Court and continued the same business under another name.

"The Insolvency Service will take firm action against companies when we find that undertakings given to protect the public and the business community have been breached."

Both ABR and OPINW Limited were wound up in the High Court on the grounds that they operated against the public interest.