A Compulsory Liquidation usually occurs when a creditor presents a petition to court for a winding up order, with the intention that it will result in the Compulsory Liquidation of the company. Most likely, upon the advertisement of the petition the bank will freeze the company bank account; this will probably not be opened until the petition is dismissed, unless a validation order can be obtained (see below).
At the hearing of the petition at court, if the director is not able to obtain an adjournment the company will be wound up and the Official Receiver will be appointed Liquidator. The company ceases to trade, its employees are dismissed and the company shuts its doors. The Official Receiver, a Government department, investigates the company and the conduct of the directors to ensure that they have acted properly in accordance with their legal duties. If the conduct of the directors has fallen below that expected of the ordinary reasonably prudent director, they may be faced with company director disqualification proceedings and possibly antecedent transaction claims.
Winding Up Petition
A winding up petition has to be advertised in the Gazette, which can often lead to your bank account being frozen. Banks have a system in place to spot petitions, and when they become aware that one of their customers is subject to a winding up petition ordinarily they will freeze the company’s bank accounts.
This can significantly adversely impact upon a company’s ability to pay its creditors as and when the same fall due. Silke & Co can assist the company in making an application for a validation order, an order of the Court authorising a company subject to a petition to pay specified payments and/or creditors, so as to keep trading pending finding a solution to dispose of any winding up petition including payment of the petition debt.
The bank should reopen the company bank account once they have received written evidence that a Winding up Petition has been dismissed.
Silke & Co can also assist with instructing a Barrister or solicitor to seek an adjournment of the Winding up Petition whilst a Company Voluntary Arrangement is prepared and/or other options are explored.
If you have any questions or require further information about the services we offer, please contact us on 01302 342875.