If a company owes money, a winding-up order is often the last resort for a creditor who wants to recover what they are owed.
A winding-up petition is an application to the court asking for an order to be made to liquidate an insolvent company. It is a serious step and creditors are strongly advised to seek legal advice before taking this action. Similarly, if you have received a winding-up notice, you should speak to an expert insolvency solicitor straight away to protect your position as far as possible. You only have a short window in which to take action to try and avoid having your company wound up.
At Witan Solicitors, our insolvency team have extensive experience in dealing with winding-up petitions. We can advise you of your options and provide guidance on the best course of action.
What is a Winding-Up Order?
A winding-up order is an order of the court requiring a company to be ended. It involves the appointment of the Official Receiver, who will liquidate the company, selling the assets and clearing debts wherever possible.
Steps in the Winding-Up Process
If you are facing difficulties in paying business debts, you are likely to be receiving demands for payment. You are advised to speak to an insolvency solicitor as soon as possible to try and deal with matters early on before the situation escalates.
When debts remain uncleared, creditors may consider asking the court to wind up a business.
The Winding-Up Petition
The first step in someone securing a winding-up order is a winding-up petition. This is an application to the court asking for an order. Someone can apply for a winding-up order if:
- They are owed a minimum of £750 by a company; and
- They can show that the company is unable to pay the sum owed
There are other options available in recovering debts owed by a company and it is crucial to explore these first, as a winding-up order is considered by the courts to be a last resort.
For more information on commercial debt recovery, see our debt recovery solicitors guide.
If you receive notice of a winding-up petition, you will also be given a date for a court hearing.
Notice of the winding-up petition will be placed in The Gazette, an official publication of record, and your bank will likely freeze your company bank account at this point, if it has not done so already when the petition was filed.
Unless you are able to provide a defence, the court is likely to grant the winding-up order. You will also be unable to sell any of the company’s assets after you receive notice of the petition.
The court will hear the case and if a winding-up order is made, the company is at an end.
What Happens After a Winding-Up Order is Made
When a winding-up order is made, the Official Receiver will start the process of liquidating the company. They will also investigate the actions of the directors to ensure that there has not been any wrongful trading or transactions that should not have taken place, for example, sales of assets following the issuing of the winding-up petition. If there are, then the Official Receiver may reverse them.
Directors will no longer have any power to act once the order has been made. Any employees are automatically dismissed when the winding-up order is issued. Any legal proceedings that are being brought against the company will be stayed.
The Official Receiver will arrange for the company’s creditors to be paid where possible and in order of preference.
The Implications of a Winding-Up Order
There can be wide-ranging implications if a winding-up order is made against a business. Firstly, the company will be at an end and the assets sold to pay debts.
A director may face disqualification if there has been misconduct. This could last for up to 15 years in the most severe cases.
If a director is guilty of wrongful trading, fraud or misfeasance, they could be personally liable for the company’s debts.
As well as damage to a director’s reputation, being involved with a company that is subject to a winding-up order can mean that they struggle to secure investment or credit for future businesses.
How to Get a Winding-Up Order
If you want to file a petition for a winding-up order, you need to be able to show that the company is unable to pay the debt that you are owed. You can include evidence such as a copy of a statutory demand you have served on the company or a court judgment awarding you a sum of money.
You should attempt to recover the money by other routes first. If you are uncertain whether you have exhausted all avenues, our debt recovery solicitors can advise you of your options.
If you are entitled to request a winding-up order and this is the best course of action, we can prepare and file the winding-up petition on your behalf. You need to be aware of the winding-up petition costs. As well as paying the court’s filing fee, you will also need to pay a petition deposit of £2,600 to the court. This can be claimed from the company, but if there are insufficient funds available, you might not recover this sum.
Once the court has sealed the petition, you will receive a copy and this needs to be served on a director or employee of the company.
The court will also set a date for the hearing and it is your responsibility to announce this by placing an advertisement in The Gazette at least 7 working days beforehand. The court will need a copy of the advertisement as well as a list of who will be present at the hearing.
Creditors can register so that they are added to the list of those owed money by the company.
Defending a Winding-Up Petition
If you dispute the winding-up petition, you should speak to an insolvency solicitor immediately as the time available to take action is very limited.
Your bank is also likely to freeze the company’s account fairly quickly, which will cause major difficulties. The court can be asked for a validation order which will unfreeze bank accounts and also allow transactions to be made that will not later be voided by the Official Receiver.
A Notice of Opposition to the winding-up petition needs to be filed and served at least 5 days before the hearing date.
You will need to provide a robust defence. This could include showing that the debt is not due, that you have a right to set off the debt or that you are able to pay.
If the petition is likely to fail or the correct procedure has not been followed by the individual presenting it, we can apply to the court to stop the petitioner from placing an advertisement in The Gazette.
Alternatives to Winding-Up
You may be able to negotiate with your creditors to enter into a company voluntary arrangement or CVA. This will allow you to continue trading while your creditors receive the money they are owed over an agreed period of time.
An insolvency practitioner can work out the details of the arrangement and ask the company’s creditors to vote on whether to accept it or not. If those holding 75% or more of the debt agree, then the CVA will be put into place. Payments to the creditors are made via the insolvency practitioner.
Alternatively, you may be able to enter into negotiations with the creditor over repayment and reach an informal agreement.
Other options include restructuring your business, entering into administration or going into voluntary liquidation.
For information about how we can help you, see our insolvency services page.
Contact Our Insolvency Solicitors
Insolvency is complex and can be very stressful, particularly if you are facing a winding-up petition. Speaking to expert insolvency solicitors will not only ensure that you are following the best possible legal route, it will also provide you with guidance and support at this difficult time.
Our insolvency team are helpful and understanding and will ensure that your interests are safeguarded. Talk to us today and we will do everything we can to assist you.
If you wish to consult with one of our lawyers specialising in insolvency, please contact us emailing info@witansolicitors.co.uk, or completing our contact form. We will engage in a discussion about your situation and explore how we can provide assistance. Our offices are conveniently located in Birmingham, Northampton, London, and Wellingborough.
