You can apply to the court to close or ‘wind up’ a company if it can’t pay its debts. This is also known as compulsory liquidation.
Your application to the court is known as a ‘winding-up petition’.
The company’s debts must be more than £750.
To petition the court to wind up a company you’ll have to:
- prove that the company cannot pay its debts
- and fill in forms and give them to the court
Once the petition has been served, it may be advertised within 7 days. Once it has been advertised, the companys bank account will be frozen and therefore you will not be able to access the funds. If a petition is advertised it does limit the options available. It also means that it is possible for other creditors to support the petition so instead of only having to deal with the petitioning creditor, you will have to deal with other creditors and therefore your options are limited again. If the companys bank account is frozen then it will almost be impossible for the company to continue to trade as it will not be able to make any paymentsThe winding up petition will state that a Court hearing has been set. If the debt is not disputed and the company is unable to settle the debt or negotiate a repayment plan, then the judge will make a winding up order at the hearing. If a winding up order is made, the Official Receiver will in the first instance be appointed as liquidator.
Specific advice should be obtained before taking action, or refraining from taking action, on any of the issues covered above.
For further information, please contact one of our Partners who will be able to assist you.