subject: Guide To Winding Up Petitions (wup) And How To Deal With Them [print this page] A company's creditor can make a legal application to the High Court or another appropriate court asking that a company be closed down and this application is called a Winding Up Petition (WUP).
The purpose of winding up a company is generally to remove control of a company from its directors so that its affairs can be dealt with properly. On completion of the process the company is dissolved and ceases to exist.
Compulsory winding-up is a legal process by which, if granted by the court, the official receiver is appointed to oversee closing down the company and may then engage a licensed insolvency practitioner as approved liquidator to carry out the processes involved, such as investigating the directors' actions for the previous three years, converting its assets to cash and negotiating with and paying creditors.
The petition must be properly served on the company, normally by personal delivery at its registered office, and must be advertised in the London Gazette. The advertisement's purpose is to notify the public but in practice is also how banks and other institutional creditors learn of the petition. The process of service and notice is complex and often petitions are rejected in Court when the petitioning creditor is unable to prove that the correct process has been followed.
Directors, on receipt of the petition, should be aware that when the bank learns about it may freeze the company bank account. They should also be aware that any further trading after the date of receipt may mean that they can be held personally liable for any company debts accrued after that date if, when their actions are investigated, they are found not to have acted in the best interests of the company's creditors.
If the directors wish to continue trading in order to save the company then they should seek help from a business rescue adviser if the company is insolvent. If they believe that trading on would benefit creditors through recovering assets, then they should seek help from an insolvency practitioner who might well be introduced by the bank or another secured creditor. Whatever the reason for continuing to trade, trading while insolvent there are issues for directors who are advised to seek professional help.
