mplications of Winding Up
For the Company
The process of winding up has very serious implications for the company.
If a winding up petition is issued, the company has 7 days to challenge it before it is advertised in the London Gazette. Once advertised the process of winding up the company is deemed to have started.
Once the petition is advertised, the company’s bank will automatically suspend the company’s bank accounts and all trading by the company must stop.
If the court subsequently grants a winding up order, the company will be closed.
For the Directors
Once the company is closed, the Official Receiver will undertake a report on the conduct of each director or the company or anyone who has acted as a director in the last three years.
If the receiver believes that any of the directors has acted improperly then they may recommend that the insolvency service should investigate the directors for wrongful trading.
The most common form of wrongful trading is allowing the company to continue to trade to the detriment of the creditors when the directors know it is already insolvent.
If wrongful trading is upheld, this could lead to the director being struck off of the register of directors and or held personally responsible for company debts.
Once a company is wound up, the directors will also be liable to pay any personal guarantees they have given in respect of any of the company’s debts. In addition, if the company has an overdrawn director’s current account, the receiver will require this debt to be repaid by the directors in question and will pursue them for this payment.
For the Employees
Once a winding up order has been granted by the court, the company will be closed. The Official Receiver will eventually make all of the employees redundant.
The amount of redundancy payment the employees are likely to receive will depend on how much cash the official receiver can collect on behalf of the business.
For the Creditors
If a company is wound up, it is likely that there will be outstanding creditors. The receiver will sell the company’s assets but it is unlikely that the money raised will be enough to pay all creditors in full.
It is important to note that all creditors will be treated the same in terms of whether their debt that they are owed is repaid.
No creditor will receive preferential payment (not even the creditor who initiated the winding up petition) unless they are a debenture holder or hold any other security over any of the company’s assets.
Winding up of a company is defined as a process by which the life of a company is brought to an end and its property administered for the benefit of its members and creditors. An administrator, called the liquidator, is appointed and he takes control of the company, collects its assets, pays debts and finally distributes any surplus among the members in accordance with their rights. At the end of winding up, the company will have no assets or liabilities. When the affairs of a company are completely wound up, the dissolution of the company takes place. On dissolution, the company's name is struck off the register of the companies and its legal personality as a corporation comes to an end.
The procedure for winding up differs depending upon whether the company is registered or unregistered. A company formed by registration under the Companies Act, 1956 is known as a registered company. It also includes an existing company, which had been formed and registered under any of the earlier Companies Acts.
NOT RELEVANT ANSWER ACCORDING TO GDB REQUIREMENTS
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What would be the reasonable suggestions from your side to stop the business wind up??