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Winding Up

Winding up is the process of attempting or succeeding to forcibly close a company and force it into Compulsory Liquidation. It happens in two stages a Winding Up Petition and a Winding up Order.

Winding Up Petition

Winding Up Petitions are official, legal notices which creditors will send out to companies with which they have outstanding arrears. The intention behind these notices is to request that debts be paid immediately, with a view to have the company address these outstanding debts before resorting to court action. This court action will result in a Compulsory Liquidation ordered by the courts. These petitions cannot be issued in response to debts under £750, once the debts have surpassed this mark there is no upper threshold at which these petitions are no longer a valid option for creditors.

These notices are incredibly serious and must not be ignored, once published this petition automatically freezes any and all company accounts meaning you can no longer trade or continue as a business. 

If a company has genuine evidence to contest the claims and dispute any outstanding arrears, they can appeal to the courts to abort any action and provide their evidence for doing so.

If a company is in arrears there are several options available to de-escalate the situation and address their debts proactively.

Winding Up Order

This is the next step in the process after receipt of a formal petition and amongst the most severe action any creditor(s) can make against a company, it happens 7 days after the petition has been ordered by creditors.

A Winding Up Order is a court ordered notice which places a company in immediate liquidation as a result of a judge processing a Winding Up Petition in favour of the creditor.

In this instance, the company has no option but to concede. They have lost the right to appoint an Insolvency Practitioner of their own and will be allocated an Official Receiver (OR) who will proceed with the Liquidation of all company assets.

The company will be Liquidated (all assets sold) and eventually dissolved and removed from the registrar at Companies House.

What can I do?

Your options will be limited by the circumstances your business finds itself in, however if applicable there are several actions which can be taken.

Pay the Debts

Pay the debts in full, inclusive of any costs accrued while pursuing the Winding Up Petition. If multiple creditors have attached their case onto this petition the costs of the total arrears is payable. However, if a company is in financial turmoil this option may not be viable.

Enter Administration

Administration lets creditors know you are addressing your cash-flow problems and attempting to resolve debt issues. It also allows the company a protective legal ring which prevents any further action until the case for administration is made in full. This often gives companies some breathing room to address their debts in an appropriate way.

Enter a CVA (Company Voluntary Agreement)

This is a solution in which the company and its creditor(s) agree to a payment schedule which sees the companies receive the outstanding amount in regular payments until the debt is cleared.

Enter Voluntary Liquidation

If the company acts responsibly, they may be at liberty to enter liquidation, a process in which company assets are valued, sold/realised and any money generated from this is used to settle company debts. The company is closed and can no longer trade.


Once the petition is advertised by creditors in the official Gazette, all company accounts are frozen and not even Director’s will have access to the funds within them. Consulting the creditors and negotiating on them with this may give you time to settle the arrears before access to these funds is halted with a freeze.


If genuinely applicable with evidence to support the decision, a company can dispute their debt. This can reverse the petition and cause courts to cancel further proceedings but must only be considered when there is proper supporting evidence.

What Happens?

In the Winding Up Process the company in debt has a period of seven days in which to respond to the petition. At which point the petition will be published and the banks will take hold of the company accounts, freezing them.

This seven-day window is quite literally the window of opportunity. Should Directors feel there is an alternate option left to consider it is important to identify this and act swiftly in pursuing this option. If there is no action the company will very likely enter Compulsory Liquidation. While not impossible to reverse, once the process has passed this stage it becomes a very difficult task, so productivity and rapid action are the best courses of action.

Once the petition transitions into a Winding Up Order the courts will assign an Official Receiver (OR) to the case. This individual then becomes responsible for managing the process, liquidating the company’s assets and distributing these amongst the outstanding creditors.

What is a Hearing?

Winding Up Hearings are legal hearings that happen in the High Court, to determine whether a Winding up Petition will transition into an official Order. These hearings see judges presented with evidence which they will utilise to make their ruling. The potential outcomes for these hearings are dismissal, adjourning until a later date, or to grant the Order.

If the order is granted by the Judge, they will automatically assign the OR to the case and the Liquidation process will begin almost immediately following the ruling.

What is the Timeframe?

In most cases, the time frame spans four to six weeks, from the initial petition to the hearing, providing the courts are operating under standard working hours etc.

What are the Risks?

When a company is found to be insolvent and forced into liquidation the Directors have a duty to act in the best interest of the creditors in the lead up to this.

As part of their official duties, the OR is responsible for investigating all Director conduct in the period before insolvency/liquidation. If a Director is found to have acted under misconduct, they face a ban from the position of Director for a period of up to 15 years (in the most severe cases).

If found to have continued trading despite a clear indication of insolvency, the Directors may also become personally liable for any and all the debts that were accrued after the company become insolvent.

If you have received any documentation suggesting your company may be at risk of Compulsory Liquidation or would simply like to discuss your options with a licensed professional, contact us now. Our 0 obligation consultations allow you to get access to the help you need to, when you need it helping you make the right choices for your company.