What a winding-up order is
A winding-up order is the court's decision, at the hearing of a winding-up petition, that the company must be closed down. The company enters compulsory liquidation from that moment.
What changes for the company
- The Official Receiver, a civil servant in the Insolvency Service, usually becomes the liquidator. A private insolvency practitioner can be appointed later.
- The directors lose their powers to run the company.
- Legal action against the company cannot start or continue without the court's permission.
- Employees are normally dismissed, and the business usually stops trading.
What it means if you are owed money
You become an unsecured creditor in the liquidation, unless you hold security or a valid retention of title over goods. The liquidator sells the company's assets and pays creditors in a fixed order: the costs of the liquidation, secured and preferential creditors, then unsecured creditors. Unsecured creditors often receive a small share of what they are owed, and sometimes nothing.
What to do next
- Send a proof of debt to the liquidator with copies of your invoices.
- Watch for a notice of intended dividend in The Gazette: it sets a last date for claims.
- Check whether VAT bad debt relief applies to the unpaid invoices.