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What to do if a winding up order is made against your company

It is best to avoid a winding up order being made altogether, but what can you do if you discover such an order has been made against your company?

A winding up order will usually be made after an unpaid creditor has presented a petition to the court seeking that the company be wound up (also known as putting the company into liquidation). If the winding up order is made, it results in a liquidator being appointed, and the powers of the company’s directors cease. The liquidator of the company will seek to wind up the company’s affairs, get in all the company’s assets and then distribute those assets to creditors. Consequently, it is much better to challenge the winding up petition, rather than waiting until the order is made.

Once a winding-up order has been made against a company it is not easy to set the order aside. You may wish to consider leaving that company in liquidation and forming a new company.

If the company is substantially solvent, or there has been an error of procedure in how the company was liquidated then there are a number of ways in which the winding-up proceedings can be brought to a halt and the company can recommence trading. These are:

  • Staying the winding up.
  • Rescinding the winding-up order.
  • Appealing the order.

Stay the winding up

The liquidation of a company can be halted by seeking a stay of all proceedings in the winding up. The court has discretion whether to order a stay of winding-up proceedings.

The court may:

  • Grant a temporary stay for a fixed period of time.
  • Stay the winding-up proceedings altogether.

While proceedings are stayed, the company is not being wound up. The directors will resume control of the company and the company’s activities will no longer be restricted to those necessary for a beneficial winding up. However, winding-up proceedings that are stayed do not technically cease. The winding-up order remains on the file at Companies House. This can be a potential source of confusion, particularly for those from whom the company seeks credit in the future.

The purpose of a stay will generally be to provide the company with time to pursue either a scheme of arrangement sanctioned by the court or an appeal.

Rescinding the winding-up order

The company may seek the rescission of the winding-up order

The application should be made within five business days after the date on which the winding-up order is made. While the court has discretion to extend the time limit on application, it will not ordinarily do so unless there is a good explanation for the delay by the company.

Appealing the order

A company may appeal against a winding-up order made against it. An appeal will be allowed only where the decision appealed against was either:

  • Wrong; or
  • Unjust because of a serious procedural or other irregularity.

The time limit for filing an appeal is usually 21 days from the date of the decision being appealed.

Please contact Tim Newsome on 01782 577011 or email him at tim.newsome@myerssolicitors.co.uk

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published. 

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