Companies go into compulsory liquidation when they become insolvent – that is, unable to pay their debts, or with assets worth less than their debts – and no arrangement has been agreed with creditors.
If an insolvent company owes you money, you can ask the court to make a compulsory winding-up order against it. Generally, this only happens after you have exhausted all other ways of recovering your money.
Once the order has been made the court informs the official receiver (OR) who becomes the liquidator. 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 Secretary of State to appoint one. If there are no assets the OR will remain liquidator.
You must be owed at least £750, without dispute, before you can ask for a winding-up order. Orders can be requested either by other businesses or individuals.
This guide explains the circumstances under which compulsory winding-up orders can be made, and creditors can attempt to recover their money through the courts.
The Insolvency Service is the government agency responsible for investigating the financial failure and misconduct of individuals and companies. 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.
Table of Contents
What is compulsory winding up?
In compulsory winding up, a creditor asks the High Court, or a county court with the right jurisdiction, 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.
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 the page on insolvency of limited companies in our guide insolvency: the basics.
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 Bureaux
- 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 most frequently heard in the High Court but can be heard in a county court with insolvency jurisdiction. The court may award costs against you if it considers that you have brought the petition inappropriately – eg the company disputes the debt between you.
How do I wind up a company?
If you are owed money by a company that cannot or will not pay it back, you can apply to the court for a winding-up order. As part of your petition, you will need to prove to the court that the company cannot pay its debts.
It can be proved that a company cannot pay its debts if:
- a creditor owed over £750 serves the company with a ‘statutory demand’ – form 4.1 – which the company does not comply with within three weeks
- a creditor obtains judgment against the company and execution is unsatisfied (there are not enough assets or funds to clear the debt)
- the company cannot pay its debts when they are due
- the company’s total debts exceed its total assets
Statutory demands for debt repayment
A statutory demand is a written request for payment of a debt. The demand gives the debtor company 21 days either to settle the debt or to reach an agreement for payment. If it does not and does not dispute the money owed, the creditor can then issue a winding-up petition.
You can get a statutory demand form from your local county court or you can download statutory demand form 4.1 from the Insolvency Service website (DOC, 61K) – Opens in a new window.
For more information, see our guide on formal requests for payment: statutory demands.
The debtor company can apply to the court to have the statutory demand set aside (dismissed) or for an injunction restraining you from presenting a petition to wind up the company – usually in cases where they are counter-claiming a debt against you.
Obtaining a judgment
Another way of proving to the court that a company cannot pay its debts is showing that a creditor has obtained a judgment against it, but the sheriff or bailiff has not been able to seize enough assets to pay for the debt.
You must apply to the court if you want to issue a claim for judgment yourself.
For more information, see the page how to make a court claim in our guide on how to recover debt through court.
Judgments can be enforced in various ways, including seizure of assets, but there is no guarantee that you will receive the money you are owed.
See the page on enforcing the judgement in our guide: recover debt through court.
In which court should a winding-up petition be presented?
You can present your winding-up petition to:
- the High Court
- any district registry of the High Court
- a county court – provided that it deals with insolvency issues, it serves the area where the company’s trading address or registered office is located and the company’s paid-up share capital is £120,000 or less
To contact the High Court, write to:
The High Court
Royal Courts of Justice
Companies Court
TM 2.09
Strand
London
WC2A 2LL
Alternatively, you can contact the HM Courts and Tribunals Service Companies Winding-up Helpline on Tel 020 7947 6516.
Find contact details for a court on the HMC&TS website – Opens in a new window.
Completing the winding-up petition
To apply for a compulsory winding-up order against a company, you must complete a winding-up petition form 4.2.
Statements of truth and witness statements
The statements in your winding-up petition must be backed by a statement of truth, which can be either included in form 4.2 or put onto a separate document. The statement of truth should be authenticated (signed) by a suitable person, such as the petitioner, a director or company officer, a solicitor or some other responsible person.
You can buy these from legal stationers and other suppliers of legal forms.
Companies House
You will need details of the company to complete the petition. You can search for company information using the WebCHeck service at Companies House.
You can also get company details by calling the Companies House Contact Centre on Tel 0303 1234 500. You may, however, have to pay for some of the information you require.
Grounds for your winding-up petition
The petition will ask you to give your grounds for applying for a winding-up order, as well as other relevant information:
- where you have written a letter to the company to ask for your money, you should say what the debt was owed for, the amount you asked for in the letter and the date of the letter
- if you sent an invoice that was not paid, you should say what the debt was for, the amount you requested, and the date of the invoice
- if you are giving details of any court judgments, you should include the date of the judgment, the court concerned and the case number
- if you sent a statutory demand for your money, you should give details of the amount you demanded, the date it was served on the registered office, and proof that at least three weeks have passed since it was served
See the page in this guide on how do I wind up a company?
Your grounds for petitioning should always include a statement that the company has not paid the debt, or an agreed proportion of it. You should also say if the company has been struck off, and give the date.
European Community Regulation on insolvency proceedings
In your winding-up petition, you must say whether or not the European Community (EC) Regulation on insolvency proceedings 2000 applies. There are three types of proceedings: ‘main’, ‘secondary’ and ‘territorial’:
- Main proceedings – can be opened only in a European Union member state where the debtor company has its ‘centre of main interests’.
- Secondary proceedings – can be opened in a member state where the debtor company has an establishment. Secondary proceedings apply only to assets located in that state.
- Territorial proceedings – can be opened before main proceedings, but only by creditors of a company’s establishment in the same country. These proceedings can also be used where main proceedings cannot be opened because the company has its main interests in a country with laws which disallow it.
If the company is registered in England and Wales and mainly carries out business in England and Wales, the EC Regulation will apply and the proceedings will be main proceedings. In other circumstances you should seek more legal advice.
What happens if a company has been dissolved
If the company that owes you money has been dissolved, you can ask the court to restore the company to the Register. This will allow you to carry on with your winding-up petition. You can do this by adding an extra clause to paragraph 8 of form 4.2.
Restoration of a company is possible only with the consent of the Registrar of Companies – Companies House – and the Treasury Solicitor. You will need to obtain consent from both.
How to serve the petition
When you have completed your winding-up petition you must present it to the court. You do this by sending these documents:
- the original winding-up petition
- three copies of the petition – or four if the company has been dissolved
- the original statement of truth
- a cheque for £1,385 – this includes the £220 court fee to issue the petition and the £1,165 official receiver’s deposit, although this is refundable if the petition is withdrawn
If you bring these documents to the court yourself, instead of posting them, you will need to pay a £5 search fee in the Companies Court in London.
If the court is satisfied with your petition and the other documents, it will seal the petition and all copies, and send copies back to you. These will be marked or endorsed with the date and time they were filed, as well as the date and venue of the court hearing.
Serving the petition on the debtor company
After the court has returned the sealed copies of the petition containing the date and time it was filed and the date and venue of the hearing, you must serve it on the company that owes you money. The petition must be served at the company’s registered address – as shown on the public Register held by Companies House – either by you or by a process server company.
To find out more about process servers, see our guide on formal requests for payment: statutory demands.
You can serve a petition at the debtor company’s registered office by handing it to:
- someone who acknowledges themselves as a director, officer or employee of the company
- a person authorised to accept service on the company’s behalf
- a person who – in the server’s opinion – is a director, officer or other employee of the company
If you or your agent cannot find a suitable person at the registered offices, the petition can be served by:
- placing it in a letter box
- placing it on a table, desk, chair, the floor or a radiator
- placing it on a receptionist’s desk
- fixing it securely to the front door
You must complete a certificate of service of the petition.
The certificate of service must be sufficient to identify the petition served and must specify:
- the name and registered number of the company
- the address of the registered office of the company
- the name of the petitioner
- the court in which the petition was filed and the court reference number
- the date of the petition
- whether the copy served was a sealed copy
- the date on which service was effected
- the manner in which service was effected
If you cannot serve the petition by any of the methods listed above, you will need to apply to the court for permission to use another route, eg posting it to a director’s last-known address. If you do this, you must attach a sealed copy of the order for substituted service to the certificate of service.
Where the company has been dissolved, you must serve the extra copy of the petition to the Treasury Solicitor. This will enable you to apply for it to be restored to the Register.
See the page in this guide on what happens after serving the petition.
After serving the petition
After you have served a winding-up petition on a company that owes you money, you must complete forms to:
- provide the court with evidence that the petition has been served
- notify specified parties
- advertise the petition in the London Gazette
- certify compliance with the winding-up petition procedures
Providing evidence of service
After serving the petition, you must complete a certificate of service. For details of what this must show see the page in this guide on how to serve the petition.
If the court ordered substituted service you should attach a copy of the petition to the certificate of service. You should send it to the court as soon as possible after service and at least five business days before the hearing takes place.
Other people you should notify of a winding-up petition being served
Special arrangements apply if the company to which you have served a winding-up petition is:
- in voluntary liquidation
- in administrative receivership
- subject to an administration order or voluntary arrangement
If you discover that any of these arrangements are in place, you must send a copy of the petition on the next working day after service to the:
- liquidator
- administrative receiver
- administrator
- supervisor
See our guide on liquidation and alternatives for companies and limited liability partnerships.
Advertising your petition
Your petition must be advertised in the London Gazette, at least seven working days after it was served and not later than seven working days before the winding-up hearing. The Gazette is monitored by banks and other financial institutions, which are obliged to freeze the accounts of companies listed, in case they worsen creditors’ positions by disposing of assets before the hearing.
Certificate of compliance
At least five working days before the hearing, you must file a certificate of compliance with the court – form 4.7. This is a declaration that you have followed all the relevant procedures correctly, and must be accompanied by a copy of the full page of the London Gazette containing the advert for your petition.
Download form 4.7 from the Insolvency Service website (DOC, 46K) – Opens in a new window.
List of persons attending hearing
On the day before the winding-up hearing, you will need to send the court a list of people who intend to appear. You can do this by completing form 4.10 ‘List of Persons Intending to Appear on the Hearing of the Petition’.
The names on the form should be based on any notifications you have received, as listed in form 4.9 ‘Notice of Intention to Appear on Petition’.
Download form 4.10 from the Insolvency Service website (DOC, 48K) – Opens in a new window.
Download form 4.9 from the Insolvency Service website (DOC, 38K) – Opens in a new window.
Withdrawing your petition
You can withdraw your petition if the company concerned pays their debt to you, or for another reason. However, once a petition has been issued, the winding-up hearing will still go ahead in the court.
Contact the court staff to find out the procedure for withdrawing your petition.
What happens at the hearing?
A winding-up hearing takes place if a court decides to accept a winding-up petition from a creditor. If the court finds that the company is unable to pay its debts or meet its liabilities, it can order it to go into compulsory liquidation.
The way hearings are conducted depends on the type of court involved. They can take place in:
- the Companies Court at the High Court
- a district registry of the High Court
- a county court with the appropriate jurisdiction
In most cases, your hearing will take place in the court to which you sent your winding-up petition. The choice of court can be affected by the location of the debtor company, and the time available in courts capable of hearing your petition.
To find out about the types of court holding winding-up hearings, see the page in this guide on how do I wind up a company?
Most winding-up hearings take place in the High Court. To find out the procedure in other courts, you should contact their officials for guidance.
Hearings in the High Court
Your hearing will take place on the date marked – or endorsed – on the petition and copies returned to you by the court.
For more information, see the page in this guide on how to serve the petition.
Hearings are presided over by a registrar – a senior judge – or a district judge in county courts. You can appear in person or instruct a solicitor or barrister. Company creditors can be represented by one of their employees, if they choose, but must get the court’s permission first.
The court will usually be hearing a large number of petitions on the same day as yours, and the time it begins may vary. You can confirm the time your hearing will begin by calling the HMCS Bankruptcy and Companies Court Registry on Tel 020 7947 6102, the day before it is due to take place.
On the day, try to arrive at the court at least half an hour before the proceedings begin to give yourself time to familiarise yourself with the building’s layout. The court’s officials will tell you which room to go to and you should ensure you are there before your slot begins.
During the hearing, you can ask the registrar to:
- make a winding-up order if your papers are in order
- dismiss the petition, eg if the company has paid its debt to you or you have come to an agreement
- adjourn the hearing if you have not been able to complete the documentation according to the court’s procedures or if you are still in negotiations with the company
To find out more about the rules for completing your documentation, see the page in this guide on completing the winding-up petition.
After considering the evidence, the registrar will decide whether or not to grant the order, and how costs should be awarded. If the order is granted, the registrar will appoint an official receiver to supervise the company’s liquidation.
See the page in this guide on what happens after the winding-up order is made?
What happens after the winding-up order is made?
If the court makes an order to wind up a company it means that the company has gone into compulsory liquidation.
The court will appoint an official receiver (OR) to act as liquidator for the company. The OR’s duties are to:
- forward to the Registrar of Companies a copy of the order
- ensure that the winding-up order is advertised in the London Gazette
- advertise the order in any other way if they feel it is appropriate to do so
- investigate the company’s affairs to find out why it failed
The OR will also report to creditors on the company’s assets and liabilities and tell them the likelihood of them being repaid any of their money. The OR also has a duty to investigate the causes of the failure of the company and the conduct of the directors. Where there are assets they may call a meeting of creditors, or ask the Secretary of State to appoint an insolvency practitioner (IP) to sell the assets and pay creditors. If an IP is appointed, the OR can still investigate the conduct of the company and the directors.
Duties of company directors in liquidation proceedings
During a compulsory liquidation proceeding, the company’s directors have the following duties:
- giving information about the company’s affairs to the OR
- giving information about the company to any IP
- preserving the company’s assets and handing them over to the OR or liquidator
The OR will interview the directors face to face. They will ask for information about the company’s accounts, cashflow, assets and liabilities, and anything else affecting its ability to trade.
Directors can make a statement of truth about their conduct, which is admissible as evidence. The OR can also take into account statements of truth made by creditors, other company officials or employees, or third parties such as accountants.
The directors have a duty to ensure that the company’s assets have not been disposed of. They must also give the OR or liquidator any management accounts, company books and records, insurance policies and bank statements relating to assets held.
Report to the Secretary of State
After the OR finishes investigating the company – which will include talking to its directors and may include talking to employees and third parties such as accountants – they will send a report to the Secretary of State at the Department for Business, Innovation & Skills.
The report covers the conduct of the company’s directors over the three years before the order. If the directors have behaved improperly – eg continuing to obtain credit when there is no prospect of repayment – they can be designated as ‘unfit directors’. The Secretary of State must then decide if it is in the public interest to apply for a director disqualification order. The Insolvency Service is the government agency that will take action to disqualify directors where there is evidence of misconduct on behalf of the Secretary of State.
For more information, see our guide on director disqualification.
Stays, rescissions and appeals
Even after an order has been made, the winding-up procedure can be stayed or rescinded, or the company can appeal against it. Applications for a permanent or temporary stay can be made by the liquidator, the OR or any creditor. If the court grants a permanent stay, the directors will usually regain control of the company.
The court can also rescind, or cancel, an order at the request of the OR, the liquidator or creditors. A rescission can be granted if it can be shown, for example, that the court did not have all the relevant facts when it was considering the order. Applications must be made within seven days of the order, unless the court gives permission otherwise.
The court’s staff will tell you how to apply for a stay or rescission.
Period of liquidation
How long it takes to liquidate a company’s assets will depend on its size and the complexity of its assets and liabilities. It can take some time for the liquidator to establish the facts concerning these, and to translate them into funds for release to creditors. You should remember that some of the money owed to the company’s employees takes priority over other unsecured creditors. Also, creditors will only be paid after the costs of the liquidation – including the liquidator’s remuneration and expenses and statutory fees – have been paid in full.
When the liquidation is complete following a final meeting, the liquidator will give notice to the court and file with the Registrar of Companies, on form 4.43, notice of the final meeting of creditors. Where the OR is still in office, he will give notice to the Registrar that winding up is complete and will be released from office. Three months from the date of the notice from the liquidator or OR, the company will be dissolved, unless a request for a deferral has been made. The company is then removed from the public Register at Companies House and ceases to exist.
Sources of further information about company winding-up proceedings
There are several organisations that can provide detailed information about winding up a company that owes you money.
The Insolvency Service
The Insolvency Service is the government agency which provides the framework for dealing with financial failure and misconduct. This includes investigating the financial affairs of individuals who become bankrupt and failed companies in compulsory liquidation to find out how and why they became insolvent. Where there is evidence of misconduct the agency will take action which can result in bankrupts receiving extended restrictions and directors being disqualified, both for periods of up to 15 years.
Institute of Directors
The Institute of Directors (IoD) is a membership organisation for business leaders. It has 45,000 members in 44 regional branches in the UK, as well as a large international network.
Companies House
Companies House is responsible for:
- incorporating and dissolving limited companies
- examining and keeping company information delivered under the Companies Act and other legislation
- making this information available to the public
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Every effort has been made by the author(s) to ensure this article’s accuracy but it does not constitute legal advice tailored to your circumstances. If you act on it, you acknowledge that you do so at your own risk. We cannot assume responsibility and do not accept liability for any damage or loss which may arise as a result of your reliance upon it.
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