My Liquidation FAQ: Can A Company Liquidation Be Reversed?

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In some circumstances, businesses may find themselves wanting to reverse the decision to liquidate their company. You might be wondering if this is possible? Can a company liquidation be reversed?

Unfortunately, the answer isn’t black and white. In some cases, it is possible for a company liquidation to be reversed, however, this depends on the process by which the company was liquidated and the evidence the company can present to support their application. That’s why in order to answer the question ‘can a company liquidation be reversed’, it’s best to look at the matter via the different liquidation processes.

Reversing A Compulsory Liquidation

When a company is unable to pay its debts to creditors as they fall due, a Winding Up Order (WUP) may be issued by a creditor to initiate the process of a compulsory liquidation. If the company does not oppose the order then it will be heard in court, where, if granted by the judge, liquidation of the company’s assets will be initiated.

So going back to the question of ‘can a company liquidation be reversed’, in the case of a compulsory liquidation, it is possible to reverse the court order if companies act quickly and with the necessary knowledge. Once the court order has been made you can apply to get it rescinded within 5 working days. You may apply to cancel the order based on, but not limited to, the following reasons:

  • Your company can pay its debts
  • You could not attend the original court hearing
  • You have grounds to argue that the court did not have the relevant facts when making the decision

Your company will be required to fill in a ‘Form IAA’ and write a witness statement giving details of your assets and debts. These will be sent to the court that issued your company the Winding Up Order and within a couple of weeks, you will be given a hearing date for your application to be heard in court.

So whilst the answer to the question ‘can a company liquidation be reversed’ is technically yes in the case of a winding up order, it is important to emphasise the difficulty of getting the order cancelled. If your company is eager to stop a compulsory liquidation it should act as soon as the Winding Up Petition has been issued where there may be an opportunity to challenge the petition or engage in a Members’ Voluntary Liquidation (MVL) or Creditors’ Voluntary Liquidation (CVL). You can read more about this in our previous blog.

Reversing a Members’ Voluntary Liquidation (MVL)

An MVL is appropriate for companies that are solvent i.e their assets are greater than their liabilities. An MVL can be reversed however this needs to be done within 6 years of the liquidation being formally passed. In order to request the cancellation of an MVL, an application must be made to the high court providing evidence that the decision to reverse the liquidation would provide tangible benefit to the company. Although when referring to an MVL, the answer to the question ‘can a company liquidation be reversed’ is yes, again, it’s important to emphasise how complex and time-consuming a ‘court order restoration’ is. That’s why the decision to enter an MVL should be taken diligently and directors should always seek professional advice if they are considering liquidating their company.

Reversing a Creditors’ Voluntary Liquidation (CVL)

If a company is insolvent i.e cannot pay their liabilities as they fall due then it may be best for the company to enter a CVL. If the company suddenly finds that they are able to pay off the debts and become solvent again then the process can be halted if the company’s assets have not yet been liquidated and the company not yet been struck off (dissolved). Similar to MVLs, halting a CVL is not easy and requires a court order. If the company has been struck off it is only possible to reverse the liquidation via a process known as ‘administrative restoration’. Applications must be made within 6 years of the formal dissolution and the process is initiated by the company director submitting a Form RT01 to the Companies House who will make a decision to accept or reject the application.

If you have any queries or concerns regarding a company liquidation, please don’t hesitate to get in touch with our team today for free, confidential and no-obligation advice.

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