Information about Winding Up Orders and Petitions
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When to use Winding Up
To force the closure of a company
The main objective of the winding up process is to forcibly close or liquidate a company and stop it trading in the future. A creditor may also wish to wind up a company because they believe that a director has not acted properly and should be investigated.
On winding up a company, a report of the company's directors will be undertaken. If they are accused of wrongful trading, they may be struck off the register of directors and held liable for some or all of the company's debts.
If you have received a winding up petition or have been threatened with one, call us now to discuss your options and how to save your company
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Solutions to stop Winding Up
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Pre pack Administration
- Legacy debt written off
- Creditor action stopped
Company Voluntary Arrangement
- No additional investment
- No directors disqualification report
Voluntary Liquidation
- No significant upfront investment required
- Cash freed to run new business
Administration
- Creditor action stopped
- Business can be restructured
To enforce debt collection
Most unsecured creditors will receive little or no payment towards their debt once a company is wound up. However, recently creditors have been using the threat of winding up as a debt collection tool.
Well informed directors know only too well the serious effects on a business that a winding up petition can have. In addition, the process of defending against such a petition can be costly.
As such, the mere threat of issuing a winding up petition may be enough to trigger the payment of an outstanding debt or the agreement of a payment plan.
If you have received a winding up petition or have been threatened with one, call us now to discuss your options and how to save your company
Creditors should first pursue all other reasonable avenues
Creditors who pursue the threat of winding up as a debt collection tool must beware that this action is treated very seriously by the court.
A winding up petition will generally not be issued unless all other reasonable attempts have been made to collect the outstanding debt.
For example it would be sensible to first issue a County Court Judgement (CCJ) against the company. If this was not paid, then the court may be more willing grant a winding up petition as there is evidence that the company is not being cooperative in paying its debt and may well be insolvent.
A petitioning creditor will not receive preferential payment
If you apply for a company to be wound up in the attempt to recover debt and a winding up order is granted, it is highly likely that the company is insolvent and your debt will not be paid.
Because you initiated the winding up process does not mean that you will be treated as a preferential creditor. Unless your debt is secured you will be treated in exactly the same way as all other unsecured creditors and receive a share of any realised assets once the liquidator and secured creditors have been paid.
For this reason, HM Revenue and Customs generally apply for companies to be wound up, not because they hope that they will be able to recover unpaid taxes but because they want to stop the business from trading so that the outstanding debt does not get any worse.
If you have outstanding debt to HM Revenue and Customs in the form of VAT, PAYE or corporation tax which you cannot pay, there is a risk that HMRC will issue a winding up petition against you. Call us now to discuss your options
Directors or shareholders who no longer wish to trade
If you are a director or shareholder and want to close your company, you will not use winding up.
The process for you to consider is either members voluntary liquidation (MVL) or creditors voluntary liquidation (CVL) depending on whether the company is insolvent or not.
Call us now for further help and support