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Is It a Wind Up?

When it comes to businesses, the term “winding up” is used when a creditor begins the process of a compulsory liquidation in order to recover a debt owed by the business.  Sometimes the business owner or director begins the process of winding up the company in order to stay in control as the company goes through the liquidation process.  Today we’re going to take a look at the winding up process.

Voluntary Liquidation

If your business is struggling and you are unable to pay your bills, one of the options available to you is a creditors’ voluntary liquidation.  A limited company is a legal entity and its debts belong to the limited company and not to the directors of the company (unless they have signed personal guarantees).  If no personal guarantees have been signed then the remaining debts are also liquidated along with the company when it is removed from the company register.  Sometimes engaging the services of an insolvency practitioner can help you with winding up your business.

Compulsory Liquidation

If you’re encountering difficulties in keeping your business afloat and you haven’t decided to carry out a voluntary liquidation you may find yourself facing a winding up petition against your company from creditors.  If this happens, then it’s imperative that you seek professional advice immediately as a winding up petition means that a creditor is trying to force your business into liquidation and you face totally losing control of your business once the winding up petition is advertised in the government’s Insolvency Register.  Your business bank account will be frozen and you will be unable to move or sell any of your assets.

The winding up petition is presented to the court and if a winding up order is granted then you face compulsory liquidation of your business in which case your company’s insolvent status will be investigated by the official receiver.  Any directors of your company are then likely to receive director disqualification which can result in creditors seeking compensation from the disqualified directors.  Seeking professional help as soon as your company is threatened with a winding up petition may help you to avoid this by organising a voluntary liquidation process instead.

Winding Up a Solvent Company

If your business is still solvent and you want to liquidate it then the way to do so is via a Members’ Voluntary Liquidation (MLV).  As long as the business doesn’t have any debts (you’ll need to sign a declaration to verify this) and there is more than £25,000 in net assets you can begin the MVL process which will be completed by an insolvency practitioner.  If your net assets are less than £25,000 your accountant will be able to close down your business for you.  As a director you can complete the process yourself by applying to Companies House and having your business removed from the register and dissolved.  This can take up to four months and you’ll need to follow the process diligently, your accounts must be up to date and you need to have no outstanding debts.