Consequences of a winding up order

A winding up order has serious implications on any business. It is therefore necessary for the directors of any company, which is experiencing a financial crisis to understand what the term means and what is expected of them. Winding up company refers to the situation whereby one or more creditors want to force the closure of the company. Apart from closing down the company, a winding up petition issued by the creditors affects the directors personally. First, the order freezes all the company’s accounts meaning the company is no longer able to trade. Once the petition has been issued, the directors have no way to stop this. Secondly, each of the directors will be investigated for any wrongful acts. If the directors are found guilty of trading with full knowledge that the company was insolvent then they may be struck off. This means that the director has to give up all directorial positions he or she holds.  In addition to being struck off, the directors may be held personally liable for any debts incurred by the company from the time it became insolvent.