What a winding-up order means
When a court grants a winding-up order, an Official Receiver (OR) is appointed to take control of the company. Directors lose the power to act on behalf of the company. The company's assets are frozen and will be realised to pay creditors. The company is legally being dissolved.
At this point, conventional business finance is not available to the company itself. No lender will advance funds to a company under compulsory liquidation. The relevant question becomes whether there are any routes to preserve the business, its employees, and its value.
Options at this stage
In some circumstances, it is possible to apply to court to have a winding-up order annulled, particularly where the petitioning creditor has been paid in full or where there was a procedural error in the petition. If annulled, the company returns to normal operation and finance becomes accessible again.
Another route is a pre-packaged administration (pre-pack), where an insolvency practitioner arranges for the business and assets to be sold to a new company (often owned by the same directors) as quickly as possible. The new company is unaffected by the old company's winding-up order and can approach lenders on a clean basis.
Both routes require experienced insolvency and legal advice. This is not a situation where a finance broker is the primary professional to contact, though we can assist with financing a business rescue or the acquisition of assets from liquidation once the legal route is clear.
Frequently Asked Questions
Can I start a new company after a winding-up order?
Yes, in most cases. Unless a director has been disqualified by a Disqualification Order (which is a separate legal process), directors can form a new company. However, using the same trading name, assets, or customer relationships as the liquidated company without the liquidator's consent can constitute wrongful trading or fraudulent trading.
What is the difference between voluntary and compulsory liquidation?
Voluntary liquidation is initiated by the company's directors or shareholders (either solvent CVL or insolvent MVL). Compulsory liquidation is ordered by a court following a winding-up petition from a creditor. A winding-up order from HM Courts refers to compulsory liquidation.
Can I buy the assets of my company in liquidation?
In principle yes, through a pre-pack administration or by purchasing assets from the liquidator. However, these transactions are scrutinised carefully. The SIP 16 guidelines require pre-pack sales to connected parties to be approved by a pre-pack pool and directors must demonstrate the sale is in the best interests of creditors.