What-happens-when-a-Winding-Up-Order-is-made

What does a Winding Up Order mean and can I challenge it?

A Winding Up Order is a court command that allows your company into liquidation. The High Court appoints the Official Receiver to sell the company’s assets, repay its creditors, and shut down the company. To rescue your business, you can contest a Winding Up Order, but you need to act fast.

 

What is a Winding Up Order?

A Winding Up Order is a legal procedure that creditors (those you owe money to) can employ to compel debt payment. It’s the last step after numerous unsuccessful collection attempts by a creditor to retrieve owed money.

If you owe a creditor over £750 and fail to pay the debt, they can send you a Statutory Demand. After 21 days, the creditor can present you with a Winding Up Petition.

If you don’t contest the petition or settle the debt, the court may issue a Winding Up Order to liquidate your company.

The cost of obtaining a Winding Up Order through the courts signifies creditors’ determination to secure repayment and halt further debt accumulation. Major creditors such as banks and HMRC typically initiate this course of action.

 

What could happen when a company is in a winding-up process?

Upon receiving a Winding Up Petition from a creditor, a court hearing will be scheduled. During the hearing, the judge will determine the debt’s validity and assess the company’s ability to pay. 

If they find that the company is insolvent and incapable of payment, they will probably issue a Winding Up Order. Following the court’s decision, you have only five working days to rescue your company.

In case you are not challenging the Winding Up Order, the company will enter Compulsory Liquidation. The court will designate an Official Receiver as the liquidator. 

They will auction off the company’s assets, distribute the earnings to the creditors, and remove the company from the Companies House register, leading to its dissolution.

During the process, the Official Receiver will inspect the events preceding the company’s liquidation. If they discover any indications of misconduct or wrongful trading, they might become personally responsible for company debts or face disqualification from serving as a company director for as long as 15 years.

 

Can I stop my company going into winding up?

You can contest a Winding Up Order, but you must act promptly and provide a valid reason. 

You can petition the court to:

1. Reverse the order

If you couldn’t attend the petition hearing in person or if you’re now able to pay the debt, you can apply to have the order rescinded if the court didn’t have access to all the relevant facts during the petition hearing.

2. Stay the order 

After a Winding Up Order has been issued, the Official Receiver, a creditor, or a shareholder of the company can request to ‘stay’ the liquidation proceedings. 

The primary purpose of a stay is to grant the company additional time to appeal the decision or negotiate a Scheme of Arrangement with its creditors.

3. Appeal the order

You can also appeal the order if you believe it was wrong or unjust, particularly if your creditor did not adhere to the correct procedure. Typically, you have 21 days to appeal the decision.

Challenging a Winding Up Order is a difficult task, and your chances of success are slim unless you have a valid reason. 

Acting earlier in the process increases your likelihood of preventing liquidation and provides you with more options.

For instance, you might negotiate a Company Voluntary Arrangement (CVA) with your creditors, granting you additional time to settle your debts.

 

What are the directors’ roles after receiving a Winding Up Order?

Once a Winding Up Order has been issued, you are legally required to collaborate with the Official Receiver (OR) and help them in liquidating the company. 

Failure to fulfill your obligations will be noted in the Official Receiver’s report. You must:

  • Provide the OR with information regarding the company’s affairs.
  • Properly issue the company’s records, paperwork, and assets.
  • Participate in an interview with the OR.


During the interview, the OR will inquire about the company’s accounts, assets, and liabilities. They will seek information regarding the reasons for the company’s failure and your involvement in it. 

Additionally, they may inquire about dividend payments, payments made on behalf of the company, director’s loan accounts, and your overall business practices.

In many instances, the liquidation investigation poses no significant concern. However, if the OR discovers that you’ve breached insolvency laws—such as transferring assets from the business, giving preferential payments to affiliated creditors, or persisting in trading while insolvent, exacerbating your creditors’ situation—you could encounter severe consequences.


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Need help? 

If you’ve received a Winding Up Petition or a Winding Up Order against your company, swift action is imperative. We’re available to discuss your situation and clarify your options. 

Contact us today for a complimentary, confidential consultation, or schedule a meeting at one of our 100+ offices across the UK.

Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.