What is a compulsory winding up?

A compulsory winding up is a procedure usually bought by a creditor of the company that is owed money.

In compulsory winding up (CWU), a creditor applies to the High Court for the winding up of the affairs of an insolvent limited company. Such a legal procedure terminates with the company being struck off the register at Companies House and, therefore, ceasing to exist.

The Official Receiver, a member of the Government’s Insolvency Service, becomes liquidator, unless creditors choose another insolvency practitioner as liquidator at a subsequent creditors’ meeting. The Official Receiver manages the liquidation of the company assets, determine the reasons for the company’s financial failure, and ensure compliance with the insolvency procedure. This ultimately results in the company being removed from the register at Companies House and ceasing to exist.

It is important to note that asset realisations and distributions in a CWU attract Government ad valorem costs regardless of whether the Official Receiver has been replaced which can affect the outcome for the company’s stakeholders.

What is the Process of Compulsory Winding Up?

The compulsory winding up process typically follows as such:

1. Filing the Petition

A creditor, shareholder, or another authorised party submits a winding up petition to the High Court, usually due to unpaid debts or unresolved financial difficulties.

2. Hearing of the Petition

The court reviews the petition and decides whether to issue a winding up order. Directors of the company can present a defence if they believe liquidation is unwarranted.

3. Appointment of the Official Receiver

Once the winding up order is issued, the Official Receiver, representing the Insolvency Service, takes over the company’s affairs to evaluate its assets and liabilities and oversee the liquidation.

4. Liquidation of Company Assets

The Official Receiver or an appointed insolvency practitioner sells the company assets to repay creditors. The proceeds are distributed according to the statutory priority of claims.

5. Dissolution

Upon the completion of the liquidation process, the company is removed from the register at Companies House, marking the liquidation end.

How We Can Help

At RMT, we provide expert guidance and support to businesses navigating the compulsory winding up process. Whether your company is facing a winding up petition or seeking alternatives to compulsory liquidation, we are here to help.

We offer an initial free advice session to allow you to discuss issues which are affecting your company in a confidential and professional environment to establish how we can assist you and your business.

This session allows us to evaluate your situation and determine how we can support you and your business.

Our team works closely with your own advisers to achieve the best results for you, the company and its stakeholders.

If a winding up petition has been presented against a company, but the petition has not yet been heard by the Court, it is important that the directors seek advice from an insolvency practitioner. They may be able to replace it because a more appropriate recovery solution, such as Administration, is viable or, by agreement with the petitioner, withdrawal of the petition to facilitate a lower cost CVL.

By combining expertise and a collaborative approach, we ensure the most effective solutions are considered for your company’s unique circumstances.