Winding up a company is a very difficult time. Many directors who face such a problem feel defeated that they haven’t been able to make their company work. If your company is facing such an ordeal this guide aims to explain the process in a series of straightforward steps.
A winding up petition is usually placed before the subsequent court order is made. The court process is known as winding up the orders or of the company, which results in compulsory liquidation.
A winding up petition can be served upon the company in compulsory liquidation with the assistance of a company insolvency practitioner. Through their official receivers they will administer and investigate the company’s compulsory liquidation and establish the reason for insolvency. Once this has been carried out they will specifically investigate the actions of directors and shareholders. Once they have established this they can then begin to obtain the best return for creditors of the company and in some instances provide a surplus which will be distributed to the shareholders. As part of the legal process of winding up a company, the insolvency firm will have to report any misconduct on the part of directors and specifically seek out irresponsible trading. Where discovered, the insolvency administrators can cause directors to be personally liable for company debts.
In order to issue a winding up petition a creditor only needs to be owed a minimum of £750 .Therefore creditors can issue a winding up petition for any amount over and above £750. They cost anything from £500 to £2000 to issue. It is an expensive business when you look at whether or not you consider serving a winding up petition on a debtor company. However, the reason it is so expensive is because the petitioner has to put money on deposit with the court as well as paying legal fees to solicitors. It is clear therefore that the petitioner is taking a significant step towards forcing your business into compulsory liquidation and this should not be looked on lightly.
Some smaller companies and individual businesses may feel they have no liquefiable assets with which to satisfy the needs of a creditor serving a winding up petition on them. However, it should be recognised that a winding up petition can still be issued and completed even if the company has no assets, or even disputes the amount claimed.
Indeed, any disputes over debts should be resolved responsibly, with the creditors before a winding up petition is made usually, via a statutory demand and or in a County Court Order process.
There are ways to halt or temporarily place a stop on a winding up order. However, this can prove extremely costly and is often out of the company’s grasp by this stage in the financial life of a company. HMRC charge in the region of £800 and a creditor’s solicitor can typically charge from around £1500 plus VAT and sometimes double that amount. The only way you can avoid legal charges is swift action prior to the petition being issues, in other words when the creditor threatens a petition.