The Business Debt Advisor

Compulsory Liquidation - FAQ's

What happens if a creditor threatens to issue a petition to wind up a company?
This is a serious matter. Once a petition has been filed at court and served at the company's registered office, the petition is advertised in the London Gazette.

The banks and lenders review the London Gazette and will freeze the company's bank account once the petition is advertised. This means that ongoing trading is impossible.

Any dealings with company's assets between the date of the petition and date of a winding up order are void unless sanctioned by the court.

Do not ignore a creditor who threatens to wind up a company. Make arrangements to pay the debt or if the debt is disputed explain why. If these two options are not available seek advice as to your company's position.

What happens if a petition is served, but I pay the petition debt?
Once the petition is served you must either make arrangements to pay the debt or defend the action. Even if the debt is paid, the winding up hearing will proceed.

At the hearing, the court can dismiss the petition, make a winding up order, adjourn proceedings or make any other order as it thinks fit.

The danger is that another of your creditors will find out about the petition and join in the action. This effectively means that you need to pay or defend the claim or claims of any other creditors who have joined in the action, to avoid a winding up order being made.

A winding up order has been made, I am a director of the company, who will contact me?
Once an order has been made, the Official Receiver will contact you and request that you attend the offices of the Insolvency Service for an interview.

If the Official Receiver thinks that it is appropriate for an Insolvency Practitioner to be appointed as Liquidator, or if creditors request a meeting of creditors be called for the purpose of appointing a Liquidator, an Insolvency Practitioner being the Liquidator of the company will contact you.

What is the role of the Official Receiver or appointed Insolvency Practitioner do?
The Official Receiver's or appointed Insolvency Practitioner's role is to collect and realise the assets of the company and pay creditors, funds permitting.

The Official Receiver will also investigate the affairs of the company and the reasons for the company's failure. This includes the submission of a report on the conduct of the Directors to the Secretary of State under the Company Director's Disqualification Act 1986. The Secretary of State will use the report to decide whether to commence disqualification action. For further information read, ‘Directors' Responsibilities - Disqualification.

What should I do as a director of the company?
You are under an obligation to co-operate with the Official Receiver and any appointed Insolvency Practitioner.

Get organised at the beginning. You need to look after and hand over company assets, make sure you have all the title documents, provide a list of the names, addresses and amounts outstanding to creditors. If possible complete or provide figures for the final VAT and PAYE returns.

You need to look after the company's books and records, list and hand them over to the Official Receiver. The Official Receiver will expect to receive bank statements, cheque and paying in books, correspondence with creditors, asset valuations, insurance policies, and a back up disk of any records maintained on computer.

Be prepared for the Official Receiver's investigation. Read Directors' Responsibilities - Disqualification. If you consider that an action may be commenced against you, seek advice.

 

The Next Step

The options for a financially distressed business need to be very carefully considered. Simply forward your details on our Contact Form and we will contact you. Alternatively ring us on our FREE ADVICE LINE 0800 781 0990.