Compulsory Winding Up

If a company is experiencing financial difficulties and prompt action to resolve this is not taken, it is very likely that a creditor will petition to wind up the company.

This is when a company is closed, staff are made redundant and assets are sold involuntarily. Understandably, as the process removes all control from the director(s), this process is extremely undesirable and should be avoided if possible.

A Winding Up Order will be made after a creditor of the company petitions to the Court for it to be wound up. The Court will review the petition, make the order and appoint the Official Receiver to deal with the company. The company will be immediately closed down, staff removed, locks changed, and all assets seized.

The consequences of Compulsory Liquidation

  • The process is completely involuntary and the director(s) lose all control of the company and what happens
  • The Winding Up Order is advertised, and it is therefore public knowledge
  • The Official Receiver will investigate the director(s) conduct and report any evidence of wrongful trading
  • If any misconduct has taken place, and is proven, the director(s) could face a Directors Disqualification for up to 15 years.
  • Any criminal wrong doing will also be reported and can, in serious cases, result in the director(s) being prosecuted.

How to avoid Compulsory Liquidation

It is very rare that a creditor would opt to petition for a company to be wound up straight away. They will normally follow a procedure of chasing for the money which is owed by way of letters, phone calls or emails. If these are unsuccessful they may well instruct a bailiff or debt collection agency, in addition to registering a County Court Judgement against the company.

All of these attempts to chase for payment are serious and real indicators that the company has an issue and they therefore should not be ignored. The sooner action is taken to deal with the problem the more options will be available to the company and the director(s).

Therefore, you should seek immediate advice from a licenced Insolvency Practitioner without delay.