A winding up order is the most serious action that can be taken by a creditor (a party to whom money is owing) against your business.
Read on to discover what this means, and what are the implications for you as a company director.
Winding up Order: Definition
A winding up order is a court order that forcibly closes or ‘winds up’ a limited company, usually due to non-payment of debts.
Resulting from a judge ruling against the debtor in a winding up petition, this court order places a company into immediate liquidation.
In this situation, your options have run out, and the court will appoint an Official Receiver (OR) to liquidate all of your company’s assets.
It means the end of a limited company, the sale of any assets, and its eventual dissolution at Companies House.
What can you do if a Winding up Order is Made Against Your Business?
Once the court has made a winding up order, there’s very little you can do to prevent the liquidation of your business. If you want to save your business then you have to act earlier.
The court must review and approve the petition before it is issued to the insolvent company. After receiving the winding up petition, you then have seven days before a winding up order can be made. That gives you a window of opportunity to take one of the follow actions:
- Pay all the debts owed to the creditor who has issued the winding up petition against your business.
- Dispute the debt if you have substantial proof that the debt claim is inaccurate or unfair. You must have strong grounds to do so as this is a serious allegation against the creditor called ‘abuse of court process’.
- Propose a company voluntary arrangement (CVA) for the repayment of the debt over a longer period of time. If accepted by your creditors, that will allow you to avoid the liquidation process and continue trading.
- Get an administration order to put the company into administration. That would stay all ongoing legal action against the business, including the winding up petition. An administrator would then be appointed to evaluate some of the company’s assets and repay its debts.
Can You Challenge or Stop a Winding up Order?
Your options are very limited after a winding up order has been made. However, there are still a few avenues you could explore:
(a) Have the winding up order rescinded or dismissed
You can apply to the court to have the winding up order rescinded within seven days of the order being made. To be successful, you will have to show that the court did not have all the facts or the circumstances of the company are now materially different than when the order was made.
(b) Apply to have the liquidation proceedings stayed
An application to temporarily or permanently ‘stay’ the liquidation proceedings can be made by a creditor, a shareholder of the company, an appointed liquidator or the official receiver.
(c) Appeal the winding up order
It is possible to appeal the winding up order. However, this remedy is limited and can only take place on the basis that the decision was wrong or unjust due to serious procedural or other irregularities.
What is the Timescale of a Winding up Order?
From the moment of receiving a statutory demand, the business has 21 days to pay.
Once that period has passed and the debt remains unpaid, the creditor can ask their legal team to apply for a compulsory winding up order. From that point, it generally takes around 28 days to wind up the company.
The winding up petition is sent to and reviewed by the court. If it’s passed, it’s then sent to the insolvent company. The company then has seven days to act. If it fails to act or runs out of time and the court approves the winding up order, the liquidation process will begin. The winding up petition will be advertised in the London Gazette and the company’s bank accounts will usually be frozen.
Once the judge has granted the winding up order, the director’s powers cease. The court will appoint an official receiver to take over. Their role will be to communicate with the directors, secure any company assets, and make staff redundant.
In time, a licensed insolvency practitioner may be appointed to take over from the Official Receiver to complete the corporate liquidation.
How do you Find Out if a Winding up Order has been Issued by a Court?
All insolvency events have to be advertised in the Gazette which is the official journal of public record.
To search for winding up orders you need to click here, then click the arrow by ‘liquidation by court’ to select the box ‘winding up orders.’
Winding up Order Moratorium
As part of its measures to protect British businesses against the economic impacts of COVD-19, HMRC has temporarily suspended winding up petition until March 2021.
That has now ended and company’s can again be forcilbly wound up.