What is a Winding Up Order?

The winding up of a company can be very complex. It may involve the sale or disposal off all, some or none of its assets and liabilities.

The process will vary depending on whether it’s an individual company that has been wound-up voluntarily by its directors or if it was ordered to be wound-up under the Insolvency Act 1986.

If you are considering filing for bankruptcy protection in order to resolve debts then this article explains what happens when a company is declared insolvent by the court.

A winding order process explained

A winding up order is issued against a company who owes money to creditors but cannot pay them back due to financial difficulties. This usually occurs because they have not paid their tax bill or failed to meet payroll payments.

If your business fails to make good payment arrangements with creditors after being given several opportunities to do so, the courts will issue a ‘winding up order’ which tells creditors how much debt should be repaid as soon as possible.

The amount owed must be agreed upon between yourself and your creditors before any legal action takes place. Creditors need to agree to accept less than 100% repayment if necessary.

From this, a creditor will file a petition asking the court to force the debtor into liquidation. Once filed, the court will appoint someone called the Official Receiver to manage the affairs of the company until the case reaches final resolution.

The receiver will ensure that the funds from the company’s accounts are used to repay creditors in full. If there isn’t enough cash available to satisfy everyone, then they will sell one or more of the company’s assets at auction.

What to do if you have received a winding up order

If you receive a winding-up order, it means that the company is no longer able to pay its bills and therefore needs to go through a formal procedure known as liquidation.

This involves selling or disposing of everything owned by the company including:

• Any equipment
• All property, furniture & fittings
• Accounts receivable
• Inventory
• Leases

You’ll also need to find new suppliers and customers.

Once the receivership is complete, the remaining assets will be distributed amongst the shareholders. Anyone who owns shares will get a share of the proceeds based on the number of shares held.

If you have found your business in this position, here is some actions we suggest you take –

Pay 

We strongly advise an insolvency specialist to handle this action for you if your company doesn’t have the means to settle the creditor.

When a winding up petition is issued to your company, you need to be very careful about the transfer of company assets because a liquidator can recover these assets if a winding up order is later obtained.

Get advice from professionals 

On your behalf, an insolvency firm can be used to negotiate with the petitioning creditor. The company needs to make a quick arrangement with the creditor if they are going to be able to pay the debt in a reasonable amount of time.

If the creditor accepts the hearing petition, the court will adjourn and give the business more time to settle the debt. 

Completing this process with professionals, such as ourselves can help reduce your stress throughout the process, as we work on behalf of your company to help solve your business finance issues.

Can a winding up order be reversed?

Yes. When a winding up order comes through, it means that the debtor has defaulted on paying his/her creditors. As long as the debtor does not comply with the terms set out within the winding up order, the creditors can ask the court to reverse the decision.

Take action

If your business is facing financial problems, including the winding up order process, you need to take action.

Here at Forbes Burton, we can help you every step of the way with your business finance issues. To book a free consultation with a member of our expert team, click here. 

Or alternatively, feel free to give us a call on 0800 975 0380.