I have received a winding-up petition – what can I do?

If you’ve received a winding-up petition (WUP), you must deal with it quickly. A winding-up petition is one of the severest forms of debt recovery a creditor can take; failing to deal with it can lead to the company’s closure via compulsory liquidation.

How do I know if I’ve received a winding-up petition?

Creditors can apply for a WUP if you owe them £750 or more. If your company has received a winding-up petition, you should receive a notice confirming it.

Otherwise, winding-up petitions in England and Wales often appear in the London Gazette, the UK Government’s official public record. Although the Gazette only has to advertise the petition, not publish it.

You can also view the Gazette online. The petitioner must wait seven days after the petition is issued to advertise it, and no later than seven days before the hearing. During this period of advertisement, other creditors can ‘piggyback’ on the petition and add what the company owes them.

What do I do if I receive a winding-up petition?

Winding-up petitions don’t automatically lead to a company’s closure, but you should act immediately for the best chance of saving it. If you’re able to, you should pay the petitioning creditor for the amount stated.

You can also dispute the petition. If the petitioner refuses to withdraw it, you’ll need to lodge a defence with Companies Court at least five days before the scheduled hearing. If this fails, but you as director have a bona fide reason to oppose the petition, you can apply for an injunction to stop its publication in the Gazette.

Once the petition is advertised, your company’s bank accounts will become frozen. This will make paying the petitioner and continuing to trade difficult. You can combat this by applying to the court for a validation order. This application should include supporting information to prove the company can repay its debts, and the creditors will benefit more than if the company were to close.

Help for limited companies

If you receive a WUP or suspect one is on the way, several options may allow you to either save the company or close it in an orderly manner. The options open to you depend on how fast you act.

Close your limited company – writing off unsecured debt

A company’s debts and the resulting creditor pressure can be of such a level that trading on isn’t an option. Rather than waiting for the WUP to force compulsory liquidation, you can enter liquidation voluntarily. Creditors Voluntary Liquidation (CVL) involves appointing a licensed insolvency practitioner (IP) as liquidator. They’ll work to close the company in a more orderly manner than compulsory liquidation.

Repay your unsecured debt at an affordable rate

A Company Voluntary Arrangement (CVA) is another insolvency procedure you could explore. CVAs are suitable for limited companies that would have viable business structures if not for the high levels of debt. The process involves the insolvent company repaying a portion of its debt in affordable, tailored instalments on a monthly basis.

What if I ignore a winding-up petition?

If you choose to ignore a WUP, the courts will likely issue a winding-up order. Once the winding-up order is made, the company enters compulsory liquidation. A liquidator is appointed, trading ceases, staff are made redundant, and company assets are sold.

Compulsory liquidation allows directors less control than a voluntary liquidation and could potentially result in higher fees and lower returns.

In summary

Creditors can serve winding-up petitions (WUP) if your company owes more than £750. You can check if a WUP has been filed against your company in the London Gazette, but only if it has been advertised. If your company has received a winding-up petition, you should aim to deal with it as soon as possible. Ignoring a WUP can lead to a winding-up order and compulsory liquidation.

If you cannot pay the petition before your company’s bank accounts freeze, there are other options. You can try and dispute the petition if you have a bona fide reason to do so. Alternatively, you can explore other insolvency options, which could include a Company Voluntary Arrangement (CVA) to repay the debt, or a Creditors Voluntary Liquidation (CVL) to close it in a more orderly manner. If your bank accounts have already frozen, you’ll need to apply for a validation order to regain access to your funds.

How we can help

If your business is struggling with creditor pressure and you suspect a winding-up petition may be on its way, get in touch. Our initial advisors can assess your circumstances and help decide the best way forward for you and your business. All initial advice is free and impartial, with no obligation.

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