What is compulsory winding up?
The legal process of compulsory winding-up orders against insolvent companies through the courts.
In compulsory winding up, a creditor asks the High Court to wind up the affairs of an insolvent limited company. This legal process ends with the company's removal from the Companies House register - effectively ceasing to exist.
Once the order has been made the High Court appoints the Official Receiver (OR) as liquidator. The Official Receiver works for the Insolvency Service and finds out how and why an individual became bankrupt or a company went into compulsory liquidation.
The OR interviews the directors and informs the creditors of the liquidation. If the OR believes the company has enough assets for something to be paid to its creditors the OR will seek the appointment of an insolvency practitioner as liquidator - either by calling a creditors' meeting for the creditors to vote for the liquidator or by asking the Department for the Economy (DfE) to appoint one. If there are no assets the OR will remain liquidator.
Compulsory winding up involves the following:
- all the company's contracts - including employee contracts - are completed, transferred or ended
- the company ceases to do business
- outstanding legal disputes are settled
- all of the company's assets are sold
- any money owed to the company is collected
- any funds are distributed to creditors
- surplus funds - after the repayment of all debts - and share capital can be distributed to shareholders
For more information, see insolvency.
Sources of advice
If you are a creditor, it can be expensive to request a compulsory winding-up order, so you should get specialist legal and financial advice before petitioning the Court. Other sources of advice include:
- Citizens Advice Northern Ireland
- solicitors
- accountants
- authorised insolvency practitioners
- financial advisers
- debt advice centres
You will need to instruct a solicitor to handle the winding-up petition. A winding-up petition is heard in the High Court. The High Court may award costs against you if it considers that you have brought the petition inappropriately - eg the company disputes the debt between you.