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I’ve received a Winding Up Order: What happens next?

If a Winding Up Order is granted against your Scottish company, you are in a very serious situation. If you do not act quickly, the court will appoint a liquidator to wind up your company’s affairs and close the business. 

If the business is no longer viable and you’re happy to shut it down, one option is to let the process continue to its natural conclusion. However, if the business is still viable and you want to continue trading, you have a limited time to challenge the Winding Up Order.

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What is a Winding Up Order?

A Winding Up Order is an instruction from the court that forces your company into Compulsory Liquidation so its assets can be sold off to repay its debts. One or more of your creditors – typically large creditors such as banks and HMRC – will initiate the process if they are struggling to recover the money the company owes them. 

The first stage of the winding up procedure is usually for a creditor to issue a Statutory Demand against the company. If that remains unpaid, they can present a Winding Up Petition at the Court of Session in Edinburgh.

If you do not pay the debt or challenge the petition, the court will make a Winding Up Order. It will then appoint a liquidator to take control of the business. The liquidator will sell the company’s assets and distribute the funds to the creditors to repay as much of its debts as possible. The final step is to strike the business off the official register of companies and it will cease to exist.

What is the Winding Up Order process?

The process in Scotland is a little different to the rest of the UK, and you have less time to act to prevent the closure of your business.

  • A creditor presents a Winding Up Petition to the Court of Session in Edinburgh for a debt of £750 or more. If the company has share capital of less than £120,000, the creditor must present the petition to the local Sheriff Court instead.  
  • If the court is satisfied that the company is insolvent, it makes a First Order to serve and advertise the petition. 
  • The petition will be sent to your company’s registered address or hand-delivered by sheriff officers. 
  • At that point, the petition will be advertised in the local paper and the Edinburgh Gazette. That can make life very difficult, as your bank will become aware of the petition and freeze your accounts, which makes it almost impossible to trade. 
  • You then have eight days to lodge responses to the petition with the court.
  • The court will then call a hearing to determine whether to grant a Winding Up Order.
  • If the court makes a Winding Up Order, it will appoint an Insolvency Practitioner to act as the interim liquidator and start the process of closing the company.

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Can I stop a Winding Up Order?

You have five working days to challenge a Winding Up Order once it has been granted by the court, but you can only do so on limited grounds:

You can challenge a Winding Up Order in Scotland if:

  • The court didn’t have the full facts when making the order – You can apply to have the order rescinded if you couldn’t attend the petition hearing or your circumstances have changed and you can now pay the debt in full (plus the creditor’s costs).
  • The company is solvent or you need more time to appeal – Several parties, including the petitioning creditor, the liquidator or a shareholder of the company, can apply to ‘stay’ (i.e. delay) the proceedings. That could be an option if you need more time to appeal, the court believes the company is solvent or it’s in the public interest to grant a stay.
  • The decision was wrong or unjust – You can appeal the order if you believe the decision was unjust. That’s most commonly due to the creditor failing to follow the proper procedure.

Rather than waiting until a Winding Up Order has been made against your company, you have a better chance of saving your business if you act earlier on in the process and challenge the Winding Up Petition.

What happens to my company if the court makes a Winding Up Order?

If the court grants a Winding Up Order and you do not have grounds to challenge it, an Insolvency Practitioner will be appointed to act as the liquidator. They will terminate all employment contracts, wind up the company’s affairs and sell its assets before distributing the proceeds to the creditors in a strict order of priority. They will then dissolve the company and any outstanding debts will be written off.

Take our 60 Second Test to understand your options

There are three main ways to close a company in Scotland. Taking our 60 Second Test will help our advisers identify the correct route forward for you and your company.

While all three closure options have their advantages and disadvantages, the right one for you will depend on a number of factors including the current financial position of the company and your plans for the future.


What are the consequences of a Winding Up Order for the company directors?

As part of the winding up process, you are legally obliged to cooperate with the liquidator and hand over any financial and operational information they ask for. They will also investigate your conduct in the time leading up to and during the company’s insolvency.

If they find that you continued to trade the company when it was insolvent, transferred assets away from the business, made preferential payments to connected creditors or other instances where you did not act according to insolvency law, you could face penalties. That includes becoming personally liable for company debts or being disqualified from acting as a director for up to 15 years.

Need professional advice?

Has a Winding Up Order been granted against your company, or perhaps you’ve received a Statutory Demand that you’re struggling to pay? Whatever your circumstances, you need to act fast. At Scotland Liquidators, our licensed Insolvency Practitioners provide professional advice and practical support to protect your interests. Call today to arrange your free, same-day consultation.

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Contact the Scotland Liquidators Team

There are several options when it comes to closing a limited company and it is vitally important you choose the one which is right for you, your company, and your creditors. Whether you are struggling with rising costs, falling trade, or impatient creditors, we are here to help.

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