Once a winding up order has been made in England and Wales, the company enters compulsory liquidation. The directors’ powers cease and control of the company passes to the Official Receiver or an appointed liquidator.
In most cases, directors cannot continue trading the company after a winding up order.
It is important to distinguish carefully between the period after a petition has been presented and the position after the court has actually made a winding up order.
At a Glance
- Directors lose control of the company once a winding up order is made.
- Only the liquidator can decide whether limited trading continues.
- Validation orders apply after a petition but before an order.
- Unauthorised trading after an order may create personal liability.
What changes when a winding up order is made?
When the court makes a winding up order:
- The company is placed into compulsory liquidation.
- The Official Receiver is appointed as liquidator.
- Directors lose authority to manage the company.
- Company assets come under the control of the liquidator.
From that point onwards, it is the liquidator, not the directors, who decides how the company’s affairs are conducted.
You can read more about the formal consequences in our guide on what happens after a winding up order.
Can the company ever trade after the order?
In limited circumstances, a liquidator may continue trading the business for a short period if doing so is in the best interests of creditors.
For example, a liquidator may trade briefly in order to complete existing contracts, preserve asset value or achieve a better realisation.
However, that decision rests entirely with the liquidator. Directors cannot continue trading on their own initiative once the order has been made.
If directors attempt to continue trading without authority, they risk personal liability.
What about trading after a petition but before the order?
Confusion often arises between these two stages.
After a winding up petition has been presented but before an order is made, certain payments made by the company may be void unless validated by the court. This is commonly referred to as the “void disposition” rule.
In that situation, a company may apply for a validation order to allow specific payments or continued trading before the hearing.
A validation order applies to the period after presentation of the petition and before the court makes a winding up order. It does not allow directors to continue trading once an order has already been made.
What risks do directors face?
If a winding up order has been made, directors should not attempt to deal with company assets or continue business operations unless authorised by the liquidator.
Unauthorised activity can expose directors to:
- Personal claims for repayment of company funds.
- Misfeasance proceedings.
- Director disqualification investigations.
The legal position becomes significantly more serious once the company is in compulsory liquidation.
Is it possible to reverse a winding up order?
In limited circumstances, it may be possible to apply to the court to rescind a winding up order. This requires prompt action and strong grounds, such as procedural irregularity or full payment of the petition debt.
Once liquidation has progressed, rescission becomes increasingly difficult.
Speak to our team
If a winding up order has been made against your company, or a petition has been presented and you are unsure of the position, it is important to understand the legal distinction between these stages.
We can review your circumstances and advise on the safest course under the law of England and Wales.
