The ways in which a company can reach the point of insolvency are as varied as the people behind them. However, the way in which many companies become liquidated is very similar – a winding up order.
A winding up order is an instruction from the court to force a limited company into compulsory liquidation. The court may issue a wind up order on the back of a wind up petition issued by an impatient creditor seeking reimbursement. This creditor is most often HMRC chasing debt settlement, but a petition can be issued by any creditor to who you owe a significant amount of money.
Once a winding up order is issued from the courts it is final, and there is nothing a company director can do to stall the process. At this point it’s imperative that you seek guidance from a liquidation professional who can assist with the process and confirm your options moving forward. Enlisting the help of a licensed insolvency practitioner at an early stage will ensure the process is smooth and your company is wrapped up cleanly and efficiently allowing directors to pursue other projects.
So what should you do if you’re issued a winding up order?
Before a wind up petition can be issued by a creditor, they must prove the insolvency of the company by serving a statutory demand for the debt to be paid off with a 21 day limit. Quite often this statutory demand is the sign of an impatient creditor and a prelude to a wind up order and compulsory liquidation. From this point your company may choose to settle the debt if possible, or dispute the demand if you don’t believe you owe money. If you are in debt you can’t settle it, then there are further options that can be taken:
- Propose a Company Voluntary Arrangement. This is a legal agreement to gradually pay back the money you owe to creditors over a designated time period.
- Enter Creditors Voluntary Liquidation – for this you need the consent of the creditor.
- Get a court order to place your company into administration. This is only possible for debts less than £5000.
What if cash flow is a temporary issue, and you believe your company has a future?
Sometimes you might not be able to settle debts when they are due, but your company may have a real viable future. In this instance, a Company Voluntary Arrangement could buy you the breathing space you need to get things back up and running. With this arrangement you can stretch out the debt over a longer period and pay back debts incrementally. If you think a Company Voluntary Arrangement may be the best option for you company, then contact a liquidation professional to get guidance and help, and to streamline the process as much as possible. Not only is this required by law, but it will save you a great deal of stress and worry during the process, leaving you free to focus on maximising the potential of your company.