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femi@loftusstowe.com|Companies in England and Wales
A company is wound up when the court makes a winding up order at the hearing of a winding up petition. This is compulsory liquidation, and the official receiver becomes the company's liquidator. If the hearing has not happened yet, there is still time to act. I am Femi Ogunshakin, an insolvency solicitor, and your first 30-minute consultation is free.
This decides what can still be done. Before the hearing the company has real options. After a winding up order, the options are narrow and the deadlines are short.
At the hearing the court can dismiss the petition, adjourn it, or make a winding up order. Nothing is decided yet, so the next few days matter.
Any payment the company makes after the petition was presented is void if a winding up order follows, unless the court orders otherwise. A validation order is the court's permission for those payments, including payments out of the company bank account.
A validation order deals with the payments, not the petition debt. Depending on the position, the company may also be able to dispute the debt, agree terms with the petitioner, or apply to restrain the advertisement. Read what a winding up petition means for the full sequence.
If payroll is days away, say so when you call. I will tell you straight away whether the timing works.
Once the order is made, the official receiver becomes liquidator and stays in office until another liquidator is appointed. The court that made the order can review, rescind or vary it.
An application to rescind a winding up order must be made within five business days after the date of the order. An appeal is a separate route to a higher judge. A creditor, a shareholder, the liquidator or the official receiver can also ask the court to stay the winding up.
I act on applications to rescind the order and applications to stay the winding up. If the order was made in the last few days, call today and say so.
The liquidator takes control of all the property the company is entitled to. In most cases the official receiver stops the business trading and tells the employees about the order.
The official receiver is expected to notify the company's bank within five working days of the order. The bank will usually have frozen the account already, once the petition was advertised.
Employment is generally ended from the date of the order. Employees can apply to the government for redundancy pay, holiday pay, unpaid wages and statutory notice pay.
No action or proceeding can be started or continued against the company or its property without the court's permission.
Payments made after the petition was presented can be challenged once the order is made. The court can still be asked to validate a payment after the order, on similar principles. See section 127 of the Insolvency Act for how that rule works.
The official receiver must investigate why the company failed and how its business was run. Directors have a legal duty to cooperate with that investigation.
The office-holder must send the Secretary of State a conduct report on each person who was a director in the 3 years before the insolvency. If the court finds a director's conduct makes them unfit, it must disqualify them for between 2 and 15 years.
Directors can also face court claims in some cases. These include misfeasance, such as misapplying company money. They also include wrongful trading. This applies where a director knew, or ought to have concluded, that insolvent liquidation could not reasonably be avoided. A director who took every step to minimise creditors' losses has a defence to wrongful trading.
A payment that puts one creditor in a better position can be challenged as a preference if the company wanted that result. That intention is presumed where the creditor is a connected person. For connected persons the look-back period is 2 years. For others it is 6 months. None of these follow automatically. Each depends on the facts and on what the investigation finds.
Most of what a director can change happens before step four.
The petition is the application asking the court to wind the company up, for example because it cannot pay its debts. The order is the court's decision at the hearing to wind it up.
The official receiver becomes liquidator when the order is made. They stay in office until another liquidator is appointed.
Usually not. In most cases the official receiver stops the business trading and tells the employees. The liquidator takes control of the company's property.
The court that made the order can review, rescind or vary it. An appeal to a higher judge is a separate route.
Five business days after the date the order was made.
Before the hearing, the court can dismiss or adjourn the petition instead of making an order. After the order, the routes are rescission within five business days, an appeal, or a stay of the winding up.
The liquidator takes control of the company's property, and the official receiver notifies the bank. The bank usually freezes the account once the petition is advertised.
The official receiver investigates why the company failed and whether any director's conduct was unfit. Directors must attend an interview and cooperate.
Employment is generally ended from the date of the order. Employees can apply to the government for redundancy pay, holiday pay, unpaid wages and statutory notice pay.
The main limits are disqualification, if the court finds a director unfit, and the rule on reusing the old name. For 5 years you cannot use the old company's name or a similar one without the court's permission or a legal exception.
A free 30-minute consultation with me to explore your options and protect your business.
The fixed fee for a validation order application is £10,000 to £15,000 plus VAT, depending on the size of the petition debt. See the full fee breakdown.
Who you will deal with
Femi O. Ogunshakin
Solicitor, Tax Adviser and Former HMRC Inspector
Validation order applications are a large part of my practice. Most of the petitions I deal with are brought by HMRC, and my time as an HMRC inspector means I know how the petitioning side builds and runs these cases.
You will deal with me directly rather than with an introducer or a case handler. The work is carried out through Nexa Law, where I practise. The first 30 minutes are free.
If your company has received a winding up petition, it is important to act quickly. Call or email me to discuss how to apply for a validation order from the insolvency courts. I offer a free 30-minute consultation to help you explore your options and protect your business.
07867 795 439
Email femi@loftusstowe.com
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