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Court Winding Up

What is court winding up?

Liquidation is not generally a business rescue procedure.  It is generally a process which is designed to ensure that a company’s affairs are wound up in an orderly fashion.  If there is a surplus remaining after the assets have been sold and the costs of the process are paid, creditors are paid a dividend in accordance with the ranking set out in the law and in proportion to the debt they are owed.

If a company has significant cash pressure and few or no means to pay its creditors in the short to medium term, it can be wound-up by petitioning the Court, and placed into liquidation. The petition can be presented by the directors of the company, the company (Shareholders) or by a creditor of the company.

If the petition is presented on behalf of the company or its directors, a resolution for winding up must be passed by a meeting of the board of directors or by the shareholders if the petition is at the behest of the company.  If the petition is on behalf of a creditor, the creditor must demonstrate to the court that the company is insolvent. Usually, the creditor will seek to show that the company cannot pay its debts as they fall due.

The petition will be advertised and, in due course, a winding up order will be made and an interim liquidator will be appointed.

View our Liquidation PDF.

When to consider winding up

If your company is experiencing severe cash flow problems and is unable to pay its debts as they fall due, you should consider whether it has a long term future.  If you have doubts about its ability to trade out of its current difficulties, you should take advice from an insolvency practitioner at the earliest opportunity.

Next steps

Following their appointment the interim liquidator is responsible for winding-up the company the affairs of the company, safeguarding and realising the assets of the company for the benefit of the company’s creditors, calling a meeting of the company’s creditors to appoint a liquidator as well as considering and reporting to the Insolvency Service on the conduct of directors.

Court Winding Up Petitions Glasgow & Edinburgh, Scotland

We understand that facing up to financial challenges can be extremely difficult and stressful. However, you should be reassured to know that there are options available and, with the right advice and support, you can take the necessary steps to improve your situation.

For further information on court liquidation and advice on winding up petitions for your company, contact us today at an office near you.