This Practice Note, produced in partnership with Joan Devine and Rachael Bicknell of Addleshaw Goddard LLP, sets out what is required in Scotland for a creditor to establish that a debtor is ‘apparently insolvent’ in the bankruptcy (or sequestration) process or that a company is ‘unable to pay its debts’ in the liquidation process.
Entities that may be sequestrated or liquidated
A creditor can petition the court for the bankruptcy (also referred to as sequestration) of a debtor under the Bankruptcy (Scotland) Act 2016 (B(S)A 2016) (see Practice Note: Scotland: the process for applying for sequestration) or the liquidation of a company under the Insolvency Act 1986 (IA 1986)(see Practice Note: Scotland: compulsory liquidation). For a glossary of commonly used Scottish insolvency terms, see Practice Note: Glossary of Scottish insolvency words and expressions.
A creditor may petition the court to sequestrate the estate of a living or deceased individual, a partnership (including a dissolved partnership), a limited partnership (including a dissolved limited partnership), an unincorporated body, a body corporate or a trust (see B(S)A 2016, s 6 and Practice Note: Scotland: insolvency of ordinary partnerships and limited partnerships). A creditor may petition the court to liquidate or wind up a company which is registered under the Companies Act 2006 (CA 2006) and has its registered office in Scotland (section 73 of the IA 1986).
Eligibility to petition for bankruptcy
In the first instance, the creditor must be a qualified creditor within the meaning of B(S)A 2016, s 7 and the debtor (unless deceased) must be ‘apparently insolvent’ within the meaning of B(S)A 2016, s 16.
Qualified creditor in a bankruptcy petition
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