Winding Up Orders

Winding Up Orders

Is a creditor seeking a winding up order against your company? A winding up order is one of the most powerful legal weapons a creditor has, allowing them to initiate a winding up process against your company in order to liquidate its assets.

Winding up orders are legal orders granted by a Court judge that allow one of your company’s creditors to force liquidation. If a creditor is granted a winding up order, the company is in liquidation. A winding up order is only issued after a winding up petition has been filed and the petition has been heard by the judge. Winding up orders are extremely serious and result in the liquidation of your company.

Because of this, it’s important to take action before a winding up order is granted by a judge. Your company can respond to its creditors and prevent a winding up order from being issued during the winding up petition process.

Responding to a winding up petition

If your company’s creditors have not been paid after numerous attempts to recover debts they are owed, including statutory payment demands, they can file a winding up petition against your company. This petition costs from £300 to £800 to file, in addition to filing fees and a deposit of £1,250 with the court. Because of this, a winding up petition will only be filed for if your company’s creditor is extremely serious about closing your company.

When a winding up petition is filed, your company will receive notice. It’s important that you seek legal advice and respond to the petition immediately to prevent your company’s creditor (or creditors) from obtaining a winding up order. Even before a winding up order is granted, a winding up petition can have serious consequences for your company. Petitions are published in the Gazette, often resulting in the freezing of your company’s bank accounts and other assets.

How to respond to a winding up petition

Receiving a winding up petition results in several restrictions being placed on your company. After receiving a petition, you are restricted from entering the company into a creditors voluntary liquidation (CVL) or administration (ADM) unless the petition has been disposed of. You are also restricted from selling any of the company’s assets, or the company itself. In the event that the petition is successful, any company assets sold after it was received could be reversed by the court in order to repay your creditors.

Despite these restrictions, your company has several options for responding to a winding up petition and preventing a winding up order from being issued by the court:

  • Enter into administration to protect your company from the winding up petition and allow time to restructure and repay creditors only if it has already been disposed of.
  • Propose a company voluntary arrangement (CVA) to repay creditors on a prearranged schedule for some or all of their debts.
  • Defend your company against the petition in court, if you believe that the debt is not legitimate, or the petition is malicious.

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