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What are the effects of Winding Up?
Implications for the company
If a company receives a winding up petition, the implications are extremely serious:
- Company bank accounts will be frozen
- Company trading must be suspended
- No transactions can be carried out without court permission (variation order)
A date for a winding up hearing will be set. This hearing will go ahead even if the company has since paid the debt in full.
If a winding up order is granted by the court at the hearing, a liquidator will be appointed and the company will be closed.
There is no turning back at this point. You must act to save your business before a winding up order is granted.
If your company has been threatened with winding up, call us NOW
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Implications for Directors
Once a winding up order is granted, the court appointed liquidator will dismiss the Directors.
As with a creditors voluntary liquidation, the liquidator will be obliged to carry out an investigation of the conduct of each director (or any person who has acted as a director).
If the liquidator believes that any director has knowingly allowed the company to trade while insolvent, they could be accused of wrongful trading. This could lead to being disqualified from other directorships and even being held responsible for the company's debt.
It is possible that the liquidator will scrutinise the director's conduct more carefully where a winding up order has been issued then if the directors had initiated the closure of the company themselves through voluntary liquidation.
If your company has been threatened with winding up, call us NOW
Implications for Employees
Once a winding up order is granted, all employees will be made redundant by the liquidator. Whether or not employees receive redundancy pay will depend on whether the company can afford to pay this.
As in the case of a creditors voluntary liquidation, if the company can afford to do so it will pay each employee up to £800 redundancy.
If the company is insolvent as in the case of a creditors voluntary liquidation, then if it can afford to do so, the company will pay each employee up to £800 redundancy.
If employees are owed more than £800, the outstanding balances will be treated as any other unsecured creditor. As such, it would be unlikely that employees would receive much more from the company.
If your company has been threatened with winding up, call us NOW
Implications for Creditors
The liquidator will sell any assets that the business has to try and get the best return possible for the creditors. It is unlikely that creditors will be returned more than a small percentage of what they are owed.
The liquidator is appointed by the court. Unlike in a creditors voluntary arrangement, the creditors do not have the option to appoint their own liquidator.
The creditor who initiated the winding up process will not be treated with any preference over other creditors. As such, they are just as likely to receive little or no return as any other unsecured creditor.
If your company has been threatened with winding up, call us NOW