A winding up order is a Court order that forces an insolvent company into compulsory liquidation – a process in which the Court appoints an Official Receiver (OR) to liquidate all of the company’s assets in order to repay creditors. It results when HM Revenue & Customs or another creditor sends a winding up petition (WUP) to the Court after the insolvent company fails to repay a debt of more than £750 within 21 days of being issued a Claim – an official payment request served after a High Court judgment.
If you are asked for upfront fees for any business rescue plan, then be careful, upfront fees are not necessary to start a business rescue plan.
Once the Court has issued a winding up order there is nothing that can be done to stop the company from being completely liquidated. However, there is a short period of time during which you can take action to prevent the order from being issued. When a creditor or HMRC issues a winding up petition to the Court it is reviewed and if approved it is then issued to the insolvent company. After receiving the petition the insolvent company then has 7 days to do one of four things:
Of the four options above, pursuing a Company Voluntary Arrangement would be most the most ideal course of action, as it would allow you to come to a formal agreement with the petitioner. This would effectively save your company from liquidation and give you the time and leniency needed to recover from the owed debt. Unfortunately, the chances of getting a petitioner to agree to a CVA during this 7-day period are very slim, especially if the CVA proposal is not drawn up by a professional. Having a CVA proposal created and introduced by a licensed Insolvency Practioner is the best way to increase the chances of an agreement being reached.
If the petitioner refuses to agree to a CVA then seeking an Administration Order to have an Insolvency Practioner market and sell some of your company’s assets would be the next-best course of action. In order for this to work the company will have to contact an Insolvency firm immediately to give them enough time to assess the situation, draw up an effective Administration proposal, and present it to the Court.
If you’re unable to successfully utilise one of the above options, and a winding up order is issued anyway, there is nothing you or anyone else can do to stop the company from being liquidated. Still, there are preliminary measures you can take to minimise the possibility of directors being brought under post-liquidation scrutiny.
After liquidation the Official Receiver (OR) is given the task of investigating all actions taken by the directors during the time the company was trading insolvent. If evidence of wrongful trading is found the directors could be held personally liable for some of the company debts, or may even be banned from acting as the director of any company for up to 15 years.
By consulting with an Insolvency Practitioner as soon as you’re issued a winding up petition you can receive valuable guidance and learn how to record the actions of your company to show the Court that the directors fulfilled their duties while trading insolvent. Furthermore, if an Insolvency Practitioner is appointed by the court in an Administration Order the winding up process can be avoided altogether.
Contact us today and participate in a free consultation to find out how we can help your company avoid a winding up order after being issued a WUP.
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