In this article we explain the meaning of ‘winding up’ as it pertains to businesses.
We’ll cover the process and procedure by which a winding up petition unfolds, and what the options are for company directors.
Winding Up a Business: Definition
Winding up means to close a business via legal due process, resulting in its dissolution. This means it will be struck of the official register at companies house and cease to exist.
As part of this process all creditors will need to be paid, stock sold off, and liquidated assets distributed to company shareholders.
In the UK the term is often synonymous with liquidation, and rarely used to refer to solvent companies.
Winding up Petition
If a company hasn’t paid you, it’s your right to file a winding up petition at court.
Applying for a winding up petition means you’re applying to the court to close or ‘wind up’ the compay due to non payment of debt.
- The debtor must owe you at least £750
- You must be able to offer proof the company cannot pay you
Types of Winding Up
Winding up can refer to:
The process of winding up a solvent company with assets with a licensed insolvency pracitioner.
Voluntary Insolvent Liquidation
Voluntarily winding up an insolvent company is known as creditors voluntary liquidation.
The process of being forcibly wound up by an angry creditor via a ‘Winding up Petition’. This legal threat forces the payment of a debt within 7 days prior to a court hearing at which the judge can rule to compulsorily liquidate the company.
How Much Does it Cost to Wind up a Company?
- Court fee for a winding up petition = £1,880
- Process server fee = £100 approx
- Advertising a petition in the Gazette £74.50
- Solicitors fee £500-800 to lodge the petition approx
The process for voluntarily winding up an insolvent company (Creditors Voluntary Liquidation) is as follows.
(1) Meeting of Shareholders
75% of shareholders must agree before the company can be wound up. Once agreed, a winding up resolution is passed.
(2) Appointment of a Licensed Insolvency Practitioner
It is not possible to wind up a company yourself, you must appoint a licenced insolvency practitoiner such as ourselves, to ensure fair play and accordance to the letter of the law.
(3) The Winding up Advertisement is Published in the Gazette
As part of the Winding up Process, the decision is published in the Gazette, which is the official journal of public record.
(4) Creditors Meeting within 14 days
Within 14 days of the Gazette advertisement, a virtual creditors meeting is held (unless a physical meeting is chosen for specific reasons) at which the insolvency practitioner will read the statement of affairs document outlining the company position.
Winding up vs. Bankruptcy
Winding up is relevant to limited companies or partnerships, whereas bankruptcy refers to individuals.
While it remains commonly used language to say a company is bankrupt, the correct term is insolvency and the process of liquidation is known as winding up.
Winding up a Company with Assets
The process of winding up a solvent company with assets is best suited when the business had net assets in excess of £25,000.
The process allows the company to be closed down efficiently with net funds and assets distributed to shareholders.
After submitting a declaration of solvency, the liquidator’s job is to realise assets for their fair value, and issue shareholders with a final account.
The business is struck off the register at Companies House to conclude the process.
Can I Wind up a Company Which Owes me Money?
If you a creditor, owed a debt of at least £750 (which you can prove), it is your right to petition the court via a mechanism known as a ‘Winding up Petition.’
This final stage threat gives the company just 7 days to make good on its debt. If it doesn’t the case comes before a High Court Judge who rules upon the validity of the claim and, where upheld, issues a Winding up Order which puts the company into immediate compulsory liquidation.
Need Help or Advice?
If your company is being petitioned, you will need to speak to us with the swiftest urgency, as the closer it comes to the 7 day time limit, the less chance there is to find an alternative to compulsory liquidation. If you want free, confidential advice contact us via the live chat, phone or emai