What is a winding up petition?

What is a winding up petition and what can you do when you get one?

A winding up petition is an extremely serious legal notice. It is issued to a company by a creditor (such as HMRC or a bank) with the aim of forcing the payment of debts.

A winding up petition is a worst case scenario for both businesses and creditors. It is extremely costly for creditors to file a petition, while businesses on the receiving end face serious consequences.

If you have received a petition, you must act quickly to save your company from liquidation and seek for the dismissal of the sinding up petition.

Winding Up Petition

What exactly is a winding up petition?

A winding up petition is the final and most serious action a creditor can take to reclaim money owed.

Creditors ‘petition’ the court to have the company liquidated. The goal here is to use the proceeds from the liquidation of assets to pay off the debt. Once a petition has been issued, a court hearing is held to determine if the company is truly insolvent. If it is established that the company cannot pay its debts, a winding up order will be issued. An Official Receiver (OR) will then be appointed to liquidate the company.

A winding up petition can be presented by creditors owed more than £750 who have exhausted all other options, including a 21-day Statutory Demand for payment. Winding up petitions from HMRC currently present the majority of petitions, making up 60% of all those issued.

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Who can present a winding up petition?

A winding up petition may be presented by any of the following:

  • the company
  • company directors
  • creditors owed more than £750
  • an administrative receiver or administrator
  • the official receiver
  • the secretary of state

This is not an exhaustive list but it gives an idea of who may petition the courts for winding up.

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How much does a winding up petition cost?

Winding up petition costs make it a very costly procedure. Only the most determined creditors will embark on this process. The petitioning creditor will pay filing fees of £280, a deposit of £1,600 for the petition to be presented, and legal fees in excess of £1,000. These costs are recoverable and it will fall to the company being petitioned to reimburse them.

What can you do about a winding up petition?

In an ideal scenario, you will take action before the winding up petition is issued. If you’ve recently received a 21-day Statutory Demand, seek professional advice now.

If however the winding up petition has already been issued, you must act quickly. You have seven days from the date of receiving the petition to take action. After seven days, advertisement of the winding up peition is recorded in The Gazette. This often leads to the freezing of company bank accounts and you will no longer be able to trade.

To prevent this, consider one of these options:

  • Pay off the creditor. You will need to pay the debt in full and you will need to reimburse them the costs incurred by serving the petition.
  • Negotiate a Company Voluntary Agreement.
  • Negotiate with the creditor. You can request that the petition is not advertised in The Gazette, allowing you more time to pay before accounts are frozen.
  • Dispute the debt. This course of action is only appropriate if you have evidence that the amount being claimed is incorrect.
  • Attempt to obtain an Administration order. An Administration order prevents further legal action.
  • You may also consider voluntary liquidation.

If seven days elapse without action on your part, the petition will be advertised.

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The winding up order

The next step in the winding up petition process is a court hearing to determine if the petition becomes a winding up order.

If the winding up order is issued, an OR is appointed and your company will be liquidated. The Official Receiver will begin selling assets. It is virtually impossible to save your company at this point.

In addition to the liquidation of the company, the Official Receiver will be tasked with investigating the conduct of the company directors during insolvency. If evidence of misconduct is discovered – even if accidental – directors may be held personally liable for some of the debts. They can even face being banned from acting as director of any company for up to 15 years.

The content of this article was correct at time of publication.

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To conclude…

A winding up petition is an unpleasant and frightening experience but it’s important to remember that all is not lost. The quicker you act, the better your chances are of surviving to trade another day.

Seek the advice of an Insolvency Practitioner (IP) as soon as you can, but preferably during the 21-day Statutory Demand stage. An IP will be able to provide you with extensive advice, suggest the best course of action, and negotiate on your behalf – saving your company from compulsory liquidation.

Call 01489 550 440 or complete the form for free advice or a no-obligation consultation

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