Consequences of a winding-up petition - protection of assets
A considerable time may elapse between the presentation of the petition and the conclusion of the hearing. In general, the company should be allowed to continue to trade in that period but the creditors need to be protected against possible dissipation of its assets.
The court has the discretionary power, on application of the company, a creditor or a contributory to stay or restrain other proceedings against a company at any time after the presentation of a winding-up petition and before the making of a winding-up order [Note 1].
When a winding-up order is made by the court, the winding up is deemed to have commenced from the time of the presentation of the petition. Exceptions to this rule are [Note 2]:
In the case of an unregistered company, where the application to stay or restrain is made by a creditor, the power is extended to actions and proceedings against a contributory (a person who is liable to contribute in the event of a winding up) [Note 3].
Unless the court orders otherwise, any disposal of the company’s property, alteration in the status of its members or transfer of shares after the commencement of the winding up is void [Note 4]. The purpose of this provision is to preserve the value of the assets of a company for the benefit of persons interested in those assets. For more information on antecedent recoveries, please refer to chapters 31.4A and 31.4B.
If the company wishes to carry out a transaction after the presentation of the petition which may be subsequently rendered void on the making of a winding-up order, it, or any interested person, may apply to the court for an advance ruling as to whether that particular transaction would be sanctioned by the court in the event of an order being made [Note 5].
At any time after the presentation of the winding-up petition the court may appoint the official receiver or an insolvency practitioner to be the provisional liquidator of the company [Note 6]. The primary reason for such appointment is usually to safeguard the assets pending the winding up hearing. Since an appointment anticipates the making of a winding-up order, it is usually made only with the consent of the company itself or in a clear case of insolvency. For further information on provisional liquidators and their function, see chapter 2.