A winding up order is an order by the court that a company or partnership should be “wound up” and liquidated. This is usually known as compulsory liquidation. The order will follow the presentation of a winding up petition that has been put to the court by a creditor that is owed money. They in effect petition the court to say that it is insolvent as it can’t pay its debts therefore it should be forced into liquidation.
Who can try and get a winding up order?
A creditor that is owed more than £750 and has lost patience with trying to get payment by contacting the company. In most cases the creditor will have sent a statutory demand followed by a winding up petition. The costs of filing a petition are substantially more than £750 so it is best reserved for large debts. Generally, a winding up petition (WUP) costs between £400 and £800 (depending on solicitor) to issue, PLUS £2,600 court deposit (from November 2022) and a filing fee of £302, so it is a serious step to take.
What is the process for obtaining a winding up order?
- Prior to the issuing of the winding up petition the creditor will need to set out.
- Details of the amount of the debt, how it arose and how it is overdue.
- A request for the debtor’s proposals for the payment of the debt.
- A statement as to the creditor’s intention to present a petition if no acceptable proposal for payment of the debt is made by the debtor within 21 days. This last point is why a statutory demand is often made but it is not in fact necessary as long as the creditor can show it has given the requisite 21 days.
The petition is then served on the company’s registered address with a court date proposed.
The next step is the advertisement of the petition.
The creditor must allow 7 clear days after the serving of the petition on your registered office, before the petition can be advertised in the London Gazette. It must be advertised no less than 7 days before the petition hearing date.
After the advertisement the bank accounts belonging to the company served the petition are frozen. This is so that there can be no assets moved in or out of the company as these can be reversed by the court if the company subsequently goes into liquidation. This can leave the bank exposed.
The Judge will hear the petition on the court date and if the company cannot pay and there is no evidence or defence that it can pay in the future then the Judge will issue a WINDING UP ORDER.
Once this has happened the Official Receiver will start the process of liquidating the company. You MUST respond to any requests for information and records by the Official Receiver or an appointed liquidator. Failure to do so, is a criminal offence.
So how can I stop a winding up order on my company?
Apart from paying the debt, or proving that you don’t actually owe the money, there are a couple of other options.
Propose A Company Voluntary Arrangement (CVA)
It may be possible to seek the approval of creditors for a company voluntary arrangement. This is a formal insolvency mechanism that gives the company time to pay its debts. 75% by value who vote need to support the proposal. So its ability to stop a winding up order rather depends on the distribution of the debts and who the petitioner is.
Enter into administration
This stops all legal actions against the company and can give the company time to restructure or for the business to be sold. The principle aim of administration is rescue. You will need to appoint an insolvency practitioner who will get the assets valued and run the business in place of the directors. This can be expensive and is best reserved for larger businesses.
If you think you might run out of time you may be able to seek an adjournment of the hearing whilst you get your case together or need a bit of extra time to pay. The court will need to be satisfied that there is a good chance of being able to pay or be be in a position to enter a CVA. Seeking an adjournment will need a solicitor and a barrister so the costs are around £1000 and can buy you a few more weeks.
The main thing to realise is that the later you leave the threat of a winding up petition the greater the chance that you your company will be subject to to a winding up order and will be liquidated compulsorily. Don’t let this happen to you. Call us on 0800 9700539 for a no obligation chat and free advice.
