Winding up/liquidation represents the last stage in company’s life by which a company is dissolved. After winding up, the company is struck off from the Companies Register at Companies House. The company simply stops doing any business and employing staff.

1. Winding up/liquidation represents the last stage in
company’s life by which a company is dissolved. After winding
up, the company is struck off from the Companies Register at
Companies House. The company simply stops doing any
business and employing staff.
During the proceedings, the company’s assets are disposed
off, the debts are paid off out of the company’s assets, and the
surplus, if any is then distributed among the shareholders in
proportion to their holdings in the company.
And the surplus money goes to the state if it is not
distributed among shareholders by the time the company is
removed from the register.

2. There are two modes of winding up of a company.
•Winding up by the Tribunal or Compulsory Liquidation
•Voluntary Liquidation
Further Voluntary Liquidation is of 2 kinds:
(a) Members’ voluntary liquidation OR
(b) Creditors’ voluntary liquidation

3. • Compulsory Liquidation is advanced only
when the company can’t pay off the debts it
owes to its creditors or to people.
• A company is subjected to wound up only if
creditors ask to get paid either by getting a
court judgment or by issuing an official
request for payment, also known as statutory
demand.
Winding Up by Tribunal or Compulsory Liquidation

4. By Court Judgment:
If court judgment is issued, a 14 day respond
period is given to the company during which the
company can do the following:
•Pay the debt
•Reach to an agreement with the creditors
following commercial viability of the
company in future by using Company
Voluntary Arrangement (CVA)
•Putting company into administration
•Challenge the court judgment

5. Failing to respond to the court order in given
period, a bailiff or sheriff is appointed by the
court to seize all the assets.
If the seized assets aren’t worthy enough to
pay off all the debts, creditors then can apply
for winding up the company.

6. By Statutory Demand:
Following issuance of Statutory Demand, a 21 days
responding period is given to the debtor or the
company. To avoid being nominated for winding up,
the company has following options:
•Pay the debt
•Reach to an agreement with the creditors
following commercial viability of the company in
future by using Company Voluntary Arrangement
(CVA)
•Putting company into administration
•Challenge the statutory demand

7. Winding-up Petition
Creditors can apply to the court to wind up a company
by making an application known as “winding-up
petition” unless the company is unable to pay debts
worth £750 or don’t address the request of payment.
A “winding-up petition” may be filed by following people:
•The Company
•Company Directors
•Creditor/Creditors
•Contributory/Contributories

8. • The clerk of a magistrates’ court
• The official receiver
• The Secretary of State
• An administrative receiver or administrator
• The supervisor of a composition or
arrangement
• The Attorney General (in the case of a
charitable company)

9. After Winding-Up Procedures
The court issues a winding up order only if it is confirmed
that the company can’t pay its debts up to £ 750 or more
and this can be proved by following methods:
•By a certificate of personal service or substituted service
to confirm that a request for payment or statutory
demand has been served to the company
•By a bailiff’s statement showing that the bailiff wasn’t
able to recover enough assets to pay the debts.
•If it is proved that the debts of the company is more that
its assets.

10. To stop a winding-up order against the company, the
order must be challenged in the court. Else;
• Company’s bank accounts are frozen
• Assets/Property are sold by the liquidator to recover
debts
If the company isn’t bought by buyers with the intention
of continuing the business, then any & all employees will
lose their jobs. During advancement of the winding up
petition, company’s directors must co-operate with the
official receiver. Else, a 2 to 15 years ban can be imposed
or court prosecution can be carried out for failing to
carry out duties as a director or breaking the law.

11. Commencement of winding up
When a winding-up order is made by the court, the winding
up is deemed to have commenced from the time of the
presentation of the petition. Exceptions to this rule are:
• Where a resolution for voluntary winding up had already
been passed prior to such presentation, in which event
the winding up is deemed to have commenced at the
time of passing the resolution, or
• Where a winding-up order is made following
presentation of an application for administration which
the court has treated as a winding-up petition, the
winding up is deemed to commence on the making of
the order.

12. Voluntary Winding Up
Voluntary winding up simply means winding up a
company by the board members or creditors without
approaching the Tribunal.
A company may be wound up voluntarily:
• By passing an ordinary resolution
• By passing a special resolution

13. Creditors’ Voluntary Winding Up
A director/Board of Directors can propose
voluntary liquidation if
• The company can’t pay its debts
• Majority of shareholders agree to the resolution
After the agreement, the company will stop any kind
of trading and be would up.

14. Shareholder’s Agreement:
Before passing the resolution for voluntary liquidation, a
shareholder’s agreement is called for voting. Only upon
getting 75% votes in favor of winding up, “winding-up”
resolution is passed.
Once the resolution is passed, following steps must be
followed:
• Appoint an authorised insolvency practitioner as
liquidator to take charge of liquidating the company
• Send the resolution to Companies House within 15
days.
• Advertise the resolution in The Gazette.

15. Hold Creditors’ Meeting:
A creditor’s meeting must be called on within 14 days
of passing of the “winding-up resolution” with one of
the following present in that meeting:
• a director
• the company secretary
• the liquidator
The creditors must be informed about the meeting 7
days before and an advertisement should be
published in The Gazette regarding this.

16. Members’ Voluntary Winding Up
Members’ liquidation is chosen only if company is
solvent and,
• member/members of the business want to
retire
• nobody else wants to take over the family
business after the member/members step
down
• member/members don’t want to run the
business anymore

17. To opt for members’ voluntary liquidation, following 6 steps
are followed:
1. Download a ‘Declaration of solvency’ (form 4.70).
2. Fill in the declaration - it must be signed by the majority
of directors.
3. Call a general meeting with shareholders at least 5 weeks
before and pass a resolution for voluntary winding up.
4. Advertise the resolution in The Gazette within 14 days.
5. Appoint an authorized insolvency practitioner as
a liquidator who will take charge of winding up the
company.
6. Send your signed form to Companies House within 15
days of passing the resolution.

18. Role of The Liquidator
The liquidator is an authorized insolvency practitioner who
oversees the liquidation process. Soon as the liquidator is
appointed by the company or creditors, they take control of
the company and act in the interest of the creditors.
The role of the liquidator includes:
• settle any legal disputes or outstanding contracts
• sell off the company’s assets and use any money to pay
creditors
• meet deadlines for paperwork and keep authorities
informed

19. • pay liquidation costs and the final VAT bill
• bring together people owed money (creditors)
and hold meetings where necessary
• decide which creditors should be paid first
• interview the directors and report on what went
wrong in the business
• get the company removed from the companies
register

20. Following appointment of liquidator, directors are
relieved from all of their duties from the company.
They can neither control the company or anything it
owns nor act for or on behalf of the company.
A director must :
• Furnish any information seek by the liquidator
• Handover company’s assets, accounts, records
and all paperworks
• Allow the liquidator to interrogate if asked

21. Consequence of Liquidation:
• On the making of a winding-up order, a copy of the order
must forthwith be forwarded by the company (or
otherwise as may be prescribed) to the registrar of
companies, who shall enter it in his records relating to
the company.
• When a winding-up order has been made or a provisional
liquidator has been appointed, no action or proceeding
shall be proceeded with or commenced against the
company or its property, except by leave of the court and
subject to such terms as the court may impose.

22. • (When an order has been made for winding up a
company [registered but not formed under the
Companies Act 2006], no action or proceeding shall be
commenced or proceeded with against the company or
its property or any contributory of the company, in
respect of any debt of the company, except by leave of
the court, and subject to such terms as the court may
impose.
An order for winding up a company operates in
favor of all the creditors and of all contributories
of the company as if made on the joint petition of
a creditor and of a contributory.