reviewed-by
Reviewed by
Christopher Andersen
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Reviewed by Christopher Andersen
Chris is an Insolvency Practitioner regulated by the ICAEW since 2014,. He is experienced in contentious insolvency with excellent analytical skills and strong knowledge of both general and technical insolvency matters.
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15th April 2024
Contents
  1. What is a Winding Up Order?
    1. When is a Winding Up Order Issued?
    2. How to Respond to a Winding Up Order
    3. How Long does a Winding up Order take?
    4. The Role of Insolvency Practitioners in Winding Up Orders
  2. Winding up Order FAQs

What is a Winding Up Order?

A winding-up order is a court order which forcibly closes a company that cannot pay outstanding debts. It represents the beginning of a compulsory liquidation process initiated by creditors such as HMRC.

Winding up Orders are generally granted as a last resort after other debt recovery measures have failed.

Under UK law, specifically the Insolvency Act 1986, a winding up order can only be issued by a court after a winding up petition has been formally served. This petition is usually submitted by a creditor when a company fails to meet the payment obligations specified in a statutory demand within 21 days.

Once the order is granted by the court, the company must cease operations, and the liquidation of its assets begins.

The significance of a winding up order lies in its impact: it not only ceases the company’s operations but also leads to a thorough investigation into the company’s financial conduct.

Winding Up Orders

When is a Winding Up Order Issued?

A winding up order is issued when a company fails to satisfy the conditions of a statutory demand for payment issued by a creditor. This is a formal notice demanding payment of debts exceeding £750 within 21 days, according to the Insolvency Act 1986, Section 123(1)(a).

If the company fails to comply with this demand or reach an acceptable payment arrangement within the stipulated period, the creditor is entitled to petition the court for a winding up order.

How to Respond to a Winding Up Order

Once a winding up order is issued, it is crucial for company directors to act swiftly and decisively. The initial response can significantly affect the outcome for the business and its directors. Here are the steps you should consider if your company receives a winding up order:

  1. Immediate consultation with an insolvency practitioner or a legal expert specialising in corporate insolvency is essential. We can provide expert advice on the options available based on the specific circumstances of your company.
  2. Review the Order: Verify all the details, including the amount of debt claimed and the creditor’s information. This review can help determine if there are grounds to challenge the order.
  3. Consider Grounds for Challenge: If the petition contains factual inaccuracies, such as the debt amount, or if procedural errors occurred during the order’s issuance, you may have grounds to challenge it.
  4. Negotiate with Creditors: Engaging directly with the creditor who initiated the winding up order can also be a productive step. Negotiations may lead to a payment plan or settlement that could persuade the creditor to withdraw the petition.
  5. Prepare for Liquidation: If rescinding or staying the winding up order is not possible, preparing for liquidation is the next step. Ensure that all company records are up-to-date and accessible, and cooperate fully with the appointed liquidator to facilitate a smoother process.

How Long does a Winding up Order take?

From start to finish of a winding-up petition, that is, from the issue of the winding-up order to the court making a formal order to wind up the company, it can take approximately 8-10 weeks if the process proceeds smoothly and is not disputed or defended.

NEED PROFESSIONAL WINDING UP ORDER ADVICE?
If you’ve received a statutory demand you cannot pay, have been issued with a winding up petition or a winding up order has been made against your company, you need to act fast.

We can discuss your options with you and help you carefully consider the implications of each. For a free, no-obligation consultation, please get in touch with our team.

The Role of Insolvency Practitioners in Winding Up Orders

Insolvency practitioners play a crucial role once a winding up order is issued. Appointed by the court, these professionals manage the liquidation process, ensuring that all legal and regulatory requirements are met. Their responsibilities include collecting and valuing the company’s assets, paying off creditors in accordance with legal priorities, and conducting an investigation into the conduct of the company’s directors.

This investigation is key to determining whether there were any acts of wrongful trading or breaches of duty that contributed to the company’s financial downfall. Insolvency practitioners also provide a final report to the creditors and the court, outlining the outcomes of the liquidation and any actions taken against the company’s directors.

Winding up Order FAQs

Directors should consult with legal and financial advisors to understand their position, gather evidence to dispute the debt if applicable, and consider negotiating with creditors to settle debts or secure an adjournment.

When a winding-up order is issued, the company ceases operations, leading to job losses. Employees may claim unpaid wages, holiday pay, and redundancy from the National Insurance Fund up to statutory limits.

All company assets are frozen and eventually sold or liquidated by the appointed liquidator. The proceeds are used to pay off creditors in order of priority, as defined by insolvency law.

If a director is found guilty of wrongful trading, they could be held personally liable for company debts from the point they knew (or should have known) the company had no reasonable prospect of avoiding insolvency.