How is a company Wound Up

Who can wind up a company?

Any creditor who is owed more than £750 can start a winding up procedure against a limited company.

Once the process has actually started, the purpose of winding up is generally not debt collection. It is rather to force its directors to stop the company from trading and prevent them from making creditors positions any worse.

The petitioning creditor may also want to see the directors investigated for wrongful trading, struck off and held personally liable for the company's debts.

HM Revenue and Customs will commonly use winding up for this purpose.

If you have received a statutory demand or winding up petition or have been threatened with one, call us now to discuss your options and how to save your company

All other avenues for debt collection must be exhausted

The court will consider whether a company should be wound up very carefully. If a company is wound up, this can lead to job losses and unsecured creditors being left without payment. The court will not allow a company to be wound up unless there is very good reason.

Companies can often successfully challenge a winding up petition, if they feel that they have not been given a reasonable opportunity to pay. If the court agrees then it is likely to disallow the procedure.

As such, any creditor that is considering action against a company to wind it up must be careful to ensure that they have first exhausted all other reasonable attempts to collect their debt. One way to do this is first issue a County Court Judgement (CCJ). If this is ignored, it adds weight to the argument that the company is insolvent and should be closed.

If you have received a statutory demand or winding up petition or have been threatened with one, call us now to discuss your options and how to save your company

Statutory Demand Issued

Before the winding up process can start, a statutory demand must be issued against the company giving it a final opportunity to pay its debt.

Normally a creditor would instruct a solicitor to issue a statutory demand on their behalf. The cost of this wil be between £250 and £500.

If after 21 days, no agreement has been reached to repay the outstanding debt, the creditor can apply to the High Court in London for a winding up Petition.

If you have received a statutory demand or winding up petition or have been threatened with one, call us now to discuss your options and how to save your company

Winding Up Petition Presented

The application for a winding up petition must be made in the High Court in London. The cost of this will be between £1200 - £2500 and is paid for by the creditor.

If the court believes that the petition is justified and there is a good case for the company to be wound up then it will issue the petition.

The company then has 7 days to challenge the petition before it is advertised in the London Gazette. Once advertised the process of winding up the company is deemed to have started and a date for a court hearing to decide whether the company should be wound up will be set.

A hearing will take place in the High Court where the petition can be challenged if the company directors wish to argue that the company should not be closed. However, if the Court believes that the petition is justified, a winding up order will be issued and a liquidator appointed.

The physical closure of the company will then begin.

If you have received a statutory demand or winding up petition or have been threatened with one, call us now to discuss your options and how to save your company