‘Winding up’ is a more colloquial term for the liquidation process which a company may go through. Liquidation varies depending on the status of the company i.e. limited company or partnership. There are also several variants of liquidation which include the process of voluntary liquidation and compulsory liquidation.
Compulsory liquidation will often occur in the form of a winding up petition. A winding up petition can be brought against a company, and is a useful tool often employed by business lawyers to threaten payment of an uncontested debt. To apply for a winding up petition the company whom you are seeking the order against must owe you more than £750, and you must be able to demonstrate to the Court that it is uncontested, and that the debtor is unable to repay the debt as it falls due.
If a winding up petition is granted then a liquidator may be appointed who may sell the company’s assets, and once realized, any surplus funds resulting from the sale may be repaid to creditors and shareholders, providing there are sufficient funds. A risk with winding up a company is that there may be numerous secured and unsecured creditors, meaning that an unsecured creditor or shareholder may not receive all/ any of the money owed.
The requirement to successfully demonstrate to the Court that the company is unable to pay its debts, although apparently simple is often more complicated. It is not just an ordinary debt, there must be a statutory demand or a court judgement in place. Once the court receives your petition for winding up the company, they will set a date for a court hearing. If the petition is granted, then the Court will order the winding up of the company. The Court will then appoint an official receiver who will have the responsibility for following the liquidation protocol. The receiver will then begin the process of realizing the company’s assets and generating money which will be used to repay the individual who brought the petition and any other creditors who claim a debt from the company.
There is also the possibility that directors/ shareholders of a company may voluntarily wind up a company. In this event, the shareholders will appoint an authorised insolvency practitioner to act as a liquidator. If you already have instructed a business lawyer, then they will usually be able to recommend an insolvency practitioner. The appointed insolvency practitioner will then take control of the company, and the shareholders will no longer have any control over the company or any of its assets, nor will they be able to act on behalf of the company in any capacity whatsoever.
If a company is dissolved, and an individual wishes to restore it to the company register, perhaps because they are an outstanding creditor, then this may be possible in certain circumstances. There is a limitation period of six years in which to restore a company to the company register, from the time it was struck off the register.
Summerfield Browne Solicitors have offices in London, Birmingham, Cambridge, Oxford, Northampton and Market Harborough, Leicester.