HomeFWJ TakeawayWinding up petitionsGeneral winding up petition informationWhat is compulsory winding up / liquidation?

If at all possible - it is vital to avoid being wound up and going in to liquidation. Our brilliant team can help you avoid this - and also protect directors and management from personal claims. Call us today.

A compulsory winding up is usually a procedure bought by a creditor of a company that is owed money. It is possible for the company itself to place itself in a compulsory winding up, although this is unusual. A creditors voluntary winding up for liquidation is often more beneficial for the company if it needs to go into liquidation.

Circumstances for a compulsory winding up

It is necessary for a creditor to prove that they have a debt owed to them that is not disputed and there is no counterclaim for at least the sum of £10,000 (this is a temporary increase from the old limit of £750 – the new limit will remain in place until at least the end of March 2022). They must show they have asked for the money and this has not been paid.

Although it is not necessary by law, often a creditor will serve a statutory demand in advance of serving a winding up petition because this is a good way of proving that a debt is owing and hasn’t been paid. Alternatively, a creditor might have a judgment which hasn’t been satisfied.

However – it is important to note there are new temporary rules relating to statutory demands and winding up petitions in place due to Covid. It is VITAL to understand these.

What is the process of putting a company into compulsory winding up/liquidation?

A winding up petition will be issued at the court with a fee.

The winding up petition must then be served on the company. Service of the petition will need to be proved by a certificate of service and filed with the court.

If you wish to oppose the winding up petition then you need to file a witness statement in opposition at least 5 days before the hearing. You will need strong grounds to do so if the debt is not disputed. If the debt is disputed you will need to provide evidence of why it is.

Advertisement of the winding up petition

Once served, no earlier than 7 days from service, the petition must be advertised in the London Gazette.

  • unfortunately, at this point, the existence of the winding up petition becomes known to everyone, including the company’s bank, and suppliers and financiers amongst others;
  • at this point it is standard practice for banks to freeze the company account, which can have devastating consequences on the company’s ability to trade;
  • it is possible to apply to restrain the petition or the advertising of the petition if there are circumstances to allow this and you take action quickly;
  • it is also possible to apply to the court to be allowed to use the bank account for specific purposes, despite the fact that it has been frozen. At Francis Wilks & Jones we frequently deal with applications of these kind and can provide advice and act on your behalf if this becomes necessary.

After a specified period of time, there will be a winding up petition hearing. Even if you have reached an agreement with the creditor who filed the original winding up petition, once advertisement has taken place it is open to any creditor owed more than £10,000 to ‘take over’ the petition and use the winding up hearing for their own debt. The original creditor cannot withdraw the petition.

To avoid a winding up order being made against your company once a petition is served on you, it is essential that you take advice at the earliest opportunity, and identify any other creditors that may want to take over the petition.

As you can see from the above, a compulsory liquidation process can be very serious for a company and it is vital that if you receive a winding up petition or a statutory demand prior to a winding up petition, that you don’t ignore it. Our team of liquidation experts at Francis Wilks & Jones can assist you in this matter. Call us today to discuss further.

FWJ were very hands-on, getting involved from an early stage in seeking to avert an expensive set of litigation proceedings. I am more than happy to recommend their services, particularly when it comes to considering complicated issues or complex proceedings.

A client who was facing a liquidator claim for the improper withdrawal of sums from a company. We had the claim dismissed

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