Any creditor or group of creditors owed more than £750 by your company can ask the court to wind up your company (or to make you bankrupt if you are personally liable for the debt). If this happens it is called a ‘compulsory winding up’. The process starts with the creditor(s) sending the company a ‘statutory demand’. If the company does not pay the sum due within 21 days, they can then apply to wind the Company up. It is therefore essential that you and your staff recognise a statutory demand if one arrives, so you can take prompt action.
Alternatively, you may decide to start insolvency proceedings yourself – shareholders in a company can decide to wind it up without involving the court (this is called ‘voluntary liquidation’ or ‘voluntary winding up’). This can be a good solution if you feel your company has no reasonable chance of avoiding insolvency and you want to resolve matters (as well as minimising the risk of accusations of, for example, wrongful trading. As with a compulsory winding up, a liquidator must be appointed to wind the company up, and the directors’ powers cease.
An individual may only be declared bankrupt by the court. An application may be made either by the individual himself or by one of his creditors.