What Is A Winding Up Order?

What is a winding up order?

A winding up order is something that many business owners dread. In the world of business, failure is sometimes inevitable and often managing a situation effectively is more important than trying to prevent it from happening.

At Anderson Brookes, we specialise in providing personal and business debt advice to people throughout the UK. Below, we will guide you through everything you need to know about winding up orders to ensure that you are educated on the subject.

Defining a winding up order

A winding up order can be defined as a court order that forces an insolvent company into liquidation. A winding up order is put in place when a winding up petition has been presented to a court. You are able to challenge a winding up petition, however, if it is approved and you receive a winding up order then you will have a harder time stopping this.

You have a short window (7 days) where you can challenge the winding up petition or you can pay the amount that is owed. As soon as you are served a winding up petition, it’s crucial to act quickly to prevent a winding up order.

If the winding up order is issued then your company will, unfortunately, go into liquidation. Once the order is issued this is inevitable, but there are ways to prevent it. We recommend contacting a licensed insolvency practitioner.

What is a winding up petition?

A winding up petition is where an unpaid creditor petition the courts to force an insolvent company into compulsory liquidation. The petition will normally be submitted by HM Revenue & Customs or another creditor after a company has failed to repay a debt of £750 or more.

If the petition is successful and the company is determined to be insolvent, the court will then issue a winding up order.

How to stop a winding up order?

If a court has issued a winding up order then there is, unfortunately, nothing that can be done and the company will be liquidated. There is, however, a short window where you can prevent the order from happening. In order to prevent a winding up order, it’s important to focus on taking the correct steps after you have received the winding up petition. 

One of the most important things to note here is that you should seek professional advice as soon as you can. Seeking professional advice will ensure that you prevent the situation from worsening. Below, we will outline several steps you can take after you have received the petition.

  1. Pay off the creditor who has submitted the petition. This one is the most simple but in some cases may not be the easiest.
  2. Enter the company into administration
  3. Negotiating a Company Voluntary Arrangement
  4. Requesting that the court adjourn or cancel the hearing of the petition.
  5. Disputing the existence or the amount of the debt.
  6. Speak to the creditor and persuade them not to advertise the winding up petition. Your company's bank accounts and assets will be frozen if the petition is advertised.

As the director of the company you will need to come to conclusion that your company is insolvent and needs to be placed into liquidation. Rather than allowing the winding up order to be made by the court, you should contact a licensed insolvency practice, like Anderson Brookes. They will be then instructed to contact the petitioning creditor and ask them to withdraw it. 

This will be on the basis you, the director, will liquidate the company voluntarily. This is an attractive option for both parties. The creditors will not need to incur more court fees (and in most cases, they will also recover their legal costs from the company). Also the director retains control of the liquidation process.

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What happens when a winding up order is issued?

If the options above do not work out for you then there is not a lot more you can do.

If worst comes to worst and the winding up petition is approved, you will, unfortunately, be issued with a winding up order. Once the order has been issued, the official receiver will then begin the process of winding up your company.

It’s now the job of the official receiver to liquidate the company's assets in order to repay creditors.

The official receiver will start investigating all of the actions that have been taken by the directors since the company was trading insolvent. If there is a possibility that wrongful trading has been committed then the directors can be held liable for some of the company's debts.

If the situation escalates further, the company directors may be banned from the director role of any company for up to 15 years.

Once the investigations begin, the directors of your company will now lose their decision-making powers however, they will still have to cooperate to the best of their ability with the Official Receiver.

The official receiver will progress the situation by assessing the company's current position. A decision will then be made to act as the company’s liquidator or alternatively appoint a separate liquidator.

Is a winding up order reversible?

Is a winding up order reversible? This is a question many people ask. There are two main ways in which legal proceedings can be halted: applying to have the order rescinded on the basis that the court was missing relevant facts and the official receiver or appointed liquidator submitting an application to ‘stay’ liquidation proceedings.

The sooner you take action, the better. The longer you leave it then the less likely it will be to reverse the winding up order. 

Do you need help or advice on Company Liquidations?

By |2020-01-09T09:40:21+00:00May 16th, 2019|Financial|0 Comments

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