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A winding up order is a judgment from the court to close down an insolvent limited company and liquidate its assets for the benefit of creditors.
A winding up order is made following the hearing of a winding up petition that’s been made by a creditor. The making of a winding up order typically signals the end of a lengthy debt collection process on the part of a creditor to recover the money they are owed by an insolvent company.
If your company has received a winding up order, this means your company is on the verge of being liquidated via a compulsory liquidation process and permanently closed down. The ramifications for yourself as a director can also be serious depending on the circumstances surrounding the liquidation, as directors will be subject to an investigation by the appointed liquidator.
Although it’s possible to challenge a winding up order under certain circumstances, you need to act quickly as you onl have five working days from the order being made in which to make a challenge. So when are winding up orders issued, and what is the process for challenging them?
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If a company owes money it either cannot or will not pay, and the situation has been left to continue for a significant period of time, creditors may feel they have no option other than to begin legal proceedings in order to force payment.
This can be done in a number of ways including via a County Court Judgment (CCJ), a Statutory Demand, and ultimately a Winding Up Petition.
A winding up petition is the first step in having a winding up order granted. There are more options available to companies at the petition stage, so seeking professional advice from a licensed insolvency practitioner as soon as their company receives a winding up petition is always recommended.
Sometimes a company might deliberately refuse to pay, but in many cases it’s difficult for directors to know how to respond and deal with the problem if their company simply does not have the money to make the payment. A winding up petition is costly for creditors, so it’s not an action they will have undertaken lightly, and it is usually seen as a last ditch attempt to recover the money they are owed.
Seeking professional advice is key if your business experiences financial difficulty. You’ll find out your best options for the company’s future, which may include entering into a formal insolvency or restructuring procedure.
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If you owe more than £750 to a creditor which you have failed to repay, they’re entitled to issue a winding up petition against your company. If you are not able to adequately defend the winding up petition - either by paying the debt, disputing the debt, negotiating the debt, or entering into a formal insolvency process - the court is likely to grant a winding up order.
If a winding up order is granted you have only five working days to challenge it, so time is of the essence.
An Official Receiver is initially appointed to act as liquidator in cases of compulsory liquidation, but an independent insolvency practitioner (IP) may be appointed at a later date depending on the complexity of the case.
The Official Receiver will take control of the company, sell its assets to generate funds for creditors, and distribute these funds accordingly. Once this process has been completed, the company name is removed from the register at Companies House and the business is closed down.
A particular concern if you’re a director in this situation is not only the forced closure of your company, but also the potential personal ramifications such as being disqualified or held personally liable for some of the company’s debts.
The liquidator is duty-bound to investigate the conduct of all directors during the period leading up to the company becoming insolvent, and will look for any instances of wrongful trading or director misconduct.
Actions the liquidator will be looking out for as part of this process could include selling assets at undervalue, or paying some creditors ahead of others in order to deliberately mitigate their losses.
Start your online liquidation today
If you have decided liquidation is the right option for your limited company, you can take the first step and begin the process online using our online portal. Starting the process is quick, simple, and can be done at a time that suits you. Your information will be submitted to your local UK Liquidators insolvency practitioner who will be with you every step of the way. Click here to start your company’s liquidation online.
If you believe you have a legitimate challenge to a winding up order, you have five working days to act following the order being made.
You can contest the winding up order and ask for it to be cancelled only under certain situations, such as if your company can pay its debts or if you could not attend the original hearing. You must make your appeal directly to the court that made the order and provide a statement and any supporting evidence.
There is a limited chance of saving your company once a winding up order has been granted. The time to act is when you are first served with a winding up petition if you want to better your chances of saving your company from compulsory closure.
If you would like more information on winding up orders and challenging liquidation proceedings, please contact one of our expert team at UK Liquidators. We’ll provide the timely advice you need, and help you make a challenge if appropriate. We offer free same-day consultations, and work from local offices around the country.
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If you are considering liquidation for your company, taking expert advice at an early stage is crucial. At UK Liquidators, our team of licensed insolvency practitioners are committed to providing limited company directors with the help and advice they need to make an informed decision.
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