What is a compulsory winding up of the company?

In order to understand compulsory winding up orders, you need to realize that companies are actually legal persons that have legal duties and rights, just like the natural persons.

A compulsory winding up happens when a certain company is wound up by an order of the Court. Usually this happens when the company is unable to pay the debts and it falls due, i.e. it becomes excessively indebted.

The winding up petition can be presented by anyone who has to receive at least £750 from a company and who can prove all the reasonable steps taken in order to recover the debt.

However, the winding up order will be considered only after a Court hearing. The petitions are presented at the High Court by the HMRC, and the Court can either deny it or adjourn the hearing. HMRC (Her Majesty’s Revenue and Customs) i. HMRC was the institution that launched a private debt collector’s tax recovery trial in 2009, which was a big success, being thus expanded to full implementation.

Usually, when a company receives a winding up petition, it has to move fast in order to prevent the advertisement of that petition.

However, there are certain rules that must be followed in such situations, so the company has to receive the petition with at least seven days before it is advertised in the London Gazette, which is enough time to settle or to handle the petition; and the advertisement has to be published within seven days before the hearing, when the petition becomes public. This advertisement is essential and it usually seals the company’s decisive fate.

Since the advertisement can cause serious damage to the company and its investors, the petition has to be handled with extreme urgency. For instance, when the petition is advertised, all the company’s bank accounts are frozen.

When this happens, the company won’t be able to make further transactions, nor to give wages or salaries. This will have severe consequences, and thus one doesn’t have time to worry and blame around, but instead it is time to move fast and to take accurate decisions.

There are several solutions that may be made after the compulsory winding up petition, such as paying the full debt, making an agreement to pay the debt in a certain amount of time, contesting the petition by bringing a witness, placing the company into voluntary liquidation, and the worst one, allowing the company to be wound up and ceasing the trading activity.

Any of these actions will have severe consequences over the company, however they might be able to solve the situation if they move fast enough.

If you find yourself in a compulsory winding up petition insolvency situation, you should think about all the options that you have, and if you don’t know what to do next, you should take into consideration to hire 

How to use a winding up petition to freeze a debtor company’s bank accounts and assets in order to collect payment for outstanding debt?

If you are in the situation where you have to receive an important debt, and the company that owes you the money wouldn’t pay you, even after you tried to make it aware of the consequences, then you might find yourself in the situation where you will need to use a winding up order that will freeze the debtor’s bank account, letting you to collect the payment.

HMRC will present the winding up order at the High Court, and the Court will decide whether to deny or to adjourn the hearing. If the High Court will issue the winding up petition, the debtor company will have to cease all its activities, since the winding up order will freeze the bank accounts.

So, in order to recover your money, you will have to use the compulsory winding up orders which are part of UK insolvency laws. You should keep in mind that this is a decisive step, and you need to proceed carefully, only when you are completely sure that there isn’t any other way of recovering the debt. Once you make this decision, that company will suffer the consequences, affecting their business. Once you file for a compulsory winding up order, you put yourself out in the open and you start a war with that company. In the process of recovering the debt, make sure not to affect your own business’ reputation.  

After the compulsory winding up order is filed and the company receives the petition, it becomes only a matter of time until the petition will go public in the London Gazette. Once this happens, the company’s assets and its bank accounts will be frozen, and you will start receiving the debt. In urgent situations, there will be other methods to recover your money. However, the company might be able to pay the debt without getting to this final solution. Or maybe it will ask you for more time in order to pay you the debt. If you find yourself in this situation, you should consider a prolongation of the debt. In this way you will avoid an unnecessary conflict. There is also the situation where the company will contest the order. If this happens, things might get out of control, and you will be in some sort of war that might not end well. Only after you are fully aware about these situations, you may be able to calculate the risk and make a decision that will help your company. Once you file for a winding up order, there is no coming back.

Now that you have all this information, you know all the steps that need to be made in order to recover a big amount of money. Your company’s future may depend on that amount and you will need to take the best decision you can, in order to save your business.

5 - Solutions for Dealing with HMRC Winding-up Petitions

Winding up petition from HMRC

in June 2010, we posted an article explaining how to get winding up petitions dismissed and withdrawn and another, five months later, revealing how HM Revenue and Customs(HMRC) was responsible for issuing the vast majority of winding up petitions in Britain.

Sadly, very little has changed over the past three years and today, HMRC issues approximately 80 per cent of the winding up petitions received by the High Court in London – around 800 every month.

If you are behind on your VAT or PAYE tax returns; HMRC has imposed penalty charges on you; or moved your records from a local office to their collections department, chances are you have probably already been issued with a winding up petition, or soon will be.

In order to consider their options comprehensively, the director(s) must acknowledge the company is insolvent and unable to pay bills as and when they are due.

Nevertheless, a winding up petition from HMRC does not necessarily mean the company will face a compulsory liquidation.

The second article (posted in November 2010), notes how a director who receives a winding up petition from HMRC avoided closing down his business by entering into a Company Voluntary Arrangement (CVA).

In addition to a CVA, there are several available options:

1) The quickest and simplest solution is to pay the petition in full before the hearing date.

2) The director(s) may attempt to save the company by allowing it to go into liquidation, especially if there is nothing worth saving and the company has no value. They can incorporate a new company and continue trading, usually with the assets from the previous company.

3) Another viable option is a pre-pack administration, whereby the company enters into administration so it can be protected from creditors. Then, all the assets are bought back from the administrator and trade starts again, but without the barrier of having to deal with old creditors.

4) Make representation to HMRC and ask for an adjournment of the first hearing date. Providing they receive a substantial payment, usually 50 per cent of the amount owed, the court should agree.

5) Usually, petitions are preceded by a lengthy period of warnings, reminders and notices of proceedings. If you have not done so already, make representation to HMRC for an adjournment to get more time to pay the bill.