Step 1: Creditor presents a Winding Up Petition at the High Court

Any creditor who is owed £750 or more can petition for the liquidation (or winding up) of a company. The creditor must have first issued a statutory demand for the payment of the outstanding debt. The cost of issuing such a demand is normally £250-£500.

If after 21 days from the date of the issue of the statutory demand, the debt has not been paid or not disputed, then the creditor may present a winding up petition to the High Court.

The cost of presenting a winding up petition (which must be borne by the creditor) will be between £1000-£2000.

Step 2: High Court grants Winding Up Petition

The Court will not want to see the winding up of a company unless it feels that this is absolutely necessary. As such, a winding up petition will normally only be granted if the creditor can prove that all other avenues for debt collection have been exhausted (e.g. a CCJ has been issued and remains unpaid).

Once the winding up petition has been granted, the company has seven (7) days to either pay the outstanding debt in full or dispute it. After this time, notice of the petition will be advertised in the London Gazette and the proceedings for winding up the company will start.

Serious Implications
The granting of a winding up petition will have very serious implications for the company. The company’s bank will normally freeze its accounts and facilities making it almost impossible to continue trading.
 
A court hearing date for the winding up of the company will be set (always in the high court). The petition can be challenged at this hearing if the directors wish to dispute the creditor’s claims. Even if the debt is paid in full before the hearing, the hearing will still take place. 

Step 3: Winding Up Order Issued / Company Liquidated

The winding up hearing takes place at the High Court. If the court decides that the company should be wound up, a Liquidator will be appointed by the court.

The liquidator will then start the process of closing the business. The employees will be made redundant and the company’s assets will be realised for cash.

All unsecured creditors of the company will be treated as equal and paid out of any available funds. Normally such creditors will receive little or no return.

Step 4: Liquidator Reports on directors

The liquidator will make a report on the conduct of the directors of the business. The report is known as the director’s disqualification report (or D1 report).

The report will be issued to the insolvency service and will state whether or not in the liquidator’s opinion, the directors have acted properly. If not, the report may recommend that further investigation is required by the insolvency service.