Winding Up Petitions and Winding Up Orders

The process for compulsory winding up and liquidation:

1. A creditor issues a winding up petition.
2. The company has 7 days to negotiate, object or appeal.
3. After 7 days the creditor can publish the winding up petition in The Gazette for public record.
4. Once the winding up petition is published the company's bank accounts are frozen.
5. A court hearing will rule for either a dismissal of the petition or will grant a winding up order.
6. If a winding up order is ruled an official receiver immediately takes control of the company.
7. The official receiver commences the process of compulsory liquidation.

 

What is Winding Up? Winding Up Explained

A creditor can apply to the court to wind up a company (also known as a compulsory liquidation) if the company cannot pay its debts. If the court agrees then a winding up order is made and a liquidator appointed to sell any assets, settle any legal disputes, collect all money that the company is owed and make payments to creditors.

If companies cannot keep operating as a going concern, liquidation may the only option. This is intended to release as many assets as possible to pay off creditors.

The liquidator’s main responsibility is to maximize the return for creditors by realising the assets of the insolvent company and achieving the best price and distributing the proceeds to creditors in order of priority.

If necessary, the liquidator can apply to the court to restore assets that have been shielded by disposal to a connected party for less than the market value. A liquidator can also take action to make the directors personally liable for debts where they failed to act in the best interests of creditors by continuing to trade and make further losses after the company became insolvent.

The first stage of the winding up process is a winding up petition. Winding up petitions are issued by a creditor against the company to force it into closure. After the petition has been filed at court none of the assets of the company can be transferred or sold.

At least seven days after the creditor has served the petition on the company the creditor can publish the petition in The Gazette for public record. If the company that is subject to a winding up petition is to continue trading its directors must seek professional advice and act on it as quickly as possible. After seven days if the petition is published any options for rescuing the company are greatly reduced.

Once the petition is published other creditors can use the same petition to claim any debts owed and the company’s bank can be expected to freeze the company’s bank account once the petition has been advertised.

Having taken professional advice, the company may be able to negotiate with the creditor not publish the winding up petition in order to give the company time to pay the creditor’s debt before the company’s bank accounts and assets are frozen and other creditors use the petition to claim their debts too. Another option may be obtaining an administration order which can limit further action from creditors, or negotiating with creditors for a company voluntary arrangement (CVA). In some cases there may a chance to enter into voluntary liquidation rather than compulsory liquidation.

If a winding up petition process continues it proceeds to a winding up order. A winding up order starts the process of putting the company into compulsory liquidation and the court will appoint an official receiver to wind up the company.

 

Winding Up Notices

The following is a list of Notices that can be published during the process of winding up and liquidation and what they mean:

2450 Petitions to Wind-Up (Companies) (Notice 2450 under Liquidation by the Court). Placed by the petitioner. Notice of a winding up petition having been made to the courts in respect of a limited company.

2451 Petitions to Wind-Up (Partnerships) (Notice 2451 under Liquidation by the Court). Placed by the petitioner. Notice of a winding up petition having been made to the courts in respect of a partnership.

2452 Winding-Up Order (Companies) (Notice 2452 under Liquidation by the Court). Notice of a winding up order made against a company placed by the official receiver which publishes the fact that the court has found in favour of winding up the company.

2453 Winding-Up Order (Partnerships) (Notice 2453 under Liquidation by the Court). Notice of a winding up order made against a partnership placed by the official receiver which publishes the fact that the court has found in favour of winding up the partnership.

2454 Appointment of Liquidators (Notice 2454 under Liquidation by the Court). Placed by the liquidator giving notice of the date of appointment, name and address and contact details for the liquidators

2455 Meetings of Creditors (Notice 2455 under Liquidation by the Court). Placed by the liquidator or the administrator giving details of the time and place of the initial meeting of creditors or any subsequent meeting of creditors, virtual or physical, that is due to take place in a compulsory liquidation.

2458 Final Meetings (Notice 2458 under Liquidation by the Court). Placed by the liquidator giving notice of a final meeting prior to dissolution where there has not been a Creditors' Voluntary Liquidation application accompanying it, for creditors to receive the liquidators report and decide whether the liquidator should be released.

2459 Release of Liquidator (Notice 2459 under Liquidation by the Court). Notice of release of liquidator as the liquidation is completed after a meeting of creditors has accepted the liquidator's resignation and the chairman of the creditors' committee has sent a confirmation certificate to the official receiver.

2460 Notice to Creditors (Notice 2460 under Liquidation by the Court). Placed by the liquidator giving notice to creditors to provide proof of their debts and evidence to substantiate the whole or any part of a claim in a creditors' voluntary winding up.

2461 Dismissal of Winding Up Petition (Notice 2461 under Liquidation by the Court). This notice is placed by the petitioner of a winding up petition if the company has paid the debt to the creditor before the winding up court hearing, or at the hearing the judge decides that the company can repay a sufficient amount of the debt through a voluntary arrangement with the creditor and the petition to wind up is therefore dismissed.

2463 Annual Meeting (Notice 2463 under Liquidation by the Court). If the liquidation takes more than a year, there can be meetings of company and creditors at each year's end.

2465 Deemed Consent (Winding up by the Court) (Notice 2465 under Liquidation by the Court). The liquidator places a notice seeking approval from creditors in respect of their proposals or a revision of original proposals. The proposals will be approved unless the liquidators receive objections from 10% or more of creditors.

 

See also corporate insolvency:

Administration

Creditors' Voluntary Liquidation (CVL)

Winding Up Petitions and Winding Up Orders

Members’ Voluntary Liquidation (MVL)

Receivership

Company Voluntary Arrangement (CVA)

Liquidation

Company Insolvency Procedures

Warning Signs of Insolvency