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