A winding up petition is the first step taken by a creditor that is seeking a winding up order against a debtor.
A winding up order signals the beginning of the end for a company. The following consequences occur automatically once a winding up order has been made:
- The official receiver becomes the liquidator of the company;
- The powers of the company’s directors cease;
- The liquidator takes control of the company’s assets;
- Any disposition of company’s property by anyone other than the liquidator is void;
- All of the company’s papers must state that the company is in liquidation;
- The winding up order operates as notice terminating the employment contracts of all the company’s employees, who are thereby automatically dismissed; and
- There is a stay on the commencement or continuation of proceedings against the company except with the permission of the court.
In the event of a winding up, a director of a company that has had financial difficulties could face personal liability in respect of personal guarantees, fraudulent trading, wrongful trading, misfeasance, or breach of their duties as a director.