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What is winding up?
Winding up is the forced closure of a company. The process is also known as compulsory liquidation.
If a creditor is owed more than £750 which is has not been paid after undertaking reasonable collection activities, then the creditor can apply to the High Court for the company to be wound up.
If the application is successful the company will be forced to stop trading and will be closed. The company's assets will be sold and all employees will be made redundant.
The conduct of the directors will be investigated and if they have knowingly allowed the company to continue to trade while insolvent, they could then be disqualified as directors from all other companies and be held liable for the company’s debts.
If your company has been threatened with winding up, call us NOW
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How does winding up happen?
There are several stages to winding up a company:
- Creditor issues a statutory demand
The aggrieved creditor must first issue a statutory demand for their outstanding debt to be paid. If the debt has not been paid within 21 days of the issue of the demand, the creditor then has the right to apply to the High Court for a winding up petition. - Application for Winding up petition
An application for a winding up petition will be made by the creditor in the High Court. Generally the Court will not issue a petition unless the creditor can show that they have tried and failed to collect their outstanding debt using all other appropriate and reasonable means.
If the winding up petition is granted, it will be advertised in the London Gazette. This will have serious implications for the company:- Company bank accounts will be frozen
- Company trading must be suspended
- No transactions can be carried out without court permission (variation order)
- High Court Hearing
The petition for the winding up of the company will be heard at the High Court. The directors of the company have the opportunity to argue against the petition at this hearing.
If the Court decides that the company is insolvent and should be closed, then a winding up order will be granted. The Court will then appoint a liquidator to close the business immediately. - Company closed
The liquidator will sell any assets of the company and share out the proceeds of the sale to the outstanding creditors. They will also make all of the employees redundant.
The liquidator will carry out an investigation into the conduct of the company directors to make sure that they have not knowingly allowed the company to continue to trade while insolvent thus making the position of the creditors worse.
If your company has been threatened with winding up, call us NOW
