Winding-up petitions (WUP) are often considered the last resort for creditors. This is the most serious action that can be taken against your company. Once your business receives a WUP, the petition will be advertised, your company’s bank accounts will become frozen, and if the winding-up order is made, the creditor can seek to appoint an insolvency practitioner as liquidator. Below we have listed some frequently asked questions around WUPs. You can also speak to us directly for free advice and professional help.
A winding-up petition (WUP) is filed to a court for an unpaid debt of £750 or more. The petition will ask for the forceful winding-up of the indebted company if they do not pay or come to an arrangement with the creditor in question. The application, in effect, asks the court to liquidate the company as the creditor believes it is insolvent.
What is a winding-up petition?
Winding-up petitions are usually issued if your company has not paid a debt to a creditor, and they have tried several debt collection methods to recover the money, but without success.
A WUP is filed at the High Court. Once filed, there must be seven days passed until it can be advertised, and it must be advertised at least seven days before the court hearing. The petition will be heard in the High Court, where a judge will either dismiss the petition if they believe there are grounds to do so or approve it and issue a winding-up order.
A WUP is advertised in the London Gazette. The London Gazette has a public record containing details of all petitions filed in England and Wales and is one of the places you can check to see if a WUP has been filed against your company.
Before the WUP is advertised in the London Gazette, the creditor must allow seven days from serving the petition at your company’s registered address. Afterwards, the petition’s Gazette advertisement must be at least seven days before the hearing date.
A WUP can be filed when a debt is owed to a creditor, and they have been unsuccessful in their attempts to recoup funds. They may have sent letters or taken legal action, such as a CCJ or sending in the bailiffs. They must also be owed a minimum of £750 and have some certainty they cannot recoup the funds from the business by any other means.
How a winding-up petition can affect sole traders and unincorporated associations
After a WUP has been filed at the court, you will not be able to sell your assets or company, put your company into a pre-pack administration or issue any new charges. The creditor who issues the WUP must allow seven days after serving the petition before it can be advertised in the Gazette. The Gazette advertisement must be at least seven days before the high court hearing. If you pay off the debt, the petition will still exist, and creditors can attach to or “piggyback” on it to include their debts. However, if your company doesn’t pay off the debt, it will go to the petition hearing, and a winding-up order will likely be issued.
What happens when a company is issued with a winding-up petition?
If you don’t take immediate action to either pay the creditor or dispute the winding-up petition before it is advertised, the bank immediately freezes your accounts. Once this happens, the business cannot access the funds in those accounts, making it impossible to trade or even pay employees and suppliers.
What to do if a winding-up petition freezes your bank accounts
After a WUP is advertised in the London Gazette, there will be a period of at least seven days before the hearing. During that time, any other creditors can “piggyback” onto the petition to include what the debtor owes them. Once the petition is advertised, the company’s bank accounts are frozen immediately. You can apply for a Validation Order to have the accounts unfrozen. For these to be considered, you must provide clear evidence to support your case.
A creditor issues a company with a winding-up petition (WUP) to reclaim what they’re owed. A winding-up order results from the High Court hearing if the petition is approved.
If your company cannot pay the debt and there is no evidence it can be paid, then the judge will issue a winding-up order. The official receiver (OR) will start the process of liquidating your company or appoint an insolvency practitioner (IP) to act as liquidator.
More information about company closure
The official receiver or insolvency practitioners’ role is to wind up the company and close it down, sell the assets, strike the company off the register, and investigate the company director(s).
A winding-up petition’s outcome largely depends on how you handle the petition and the debt to which it relates. If you pay the debt before the petition’s advertisement, it should remove the petition, and there will be no further impact on your business. If you pay the debt or come to a payment arrangement after advertisement, it will remove the debt on the petition. However, your bank account will still be frozen, and another one of your creditors could piggyback on the action. Before repaying the petitioning debtor after a WUP has been issued, it is always wise to take advice from an insolvency practitioner or an insolvency solicitor. If you can’t or won’t pay the debt, you will be issued with a winding-up order by the court, leading to the company being wound up.
If the court accepts the petition, a hearing will be held at the High Court. At the hearing, the court will decide, based on the provided evidence, whether the company can repay its debts. If the court decides the company won’t be able to, then the company will be placed into compulsory liquidation.
More about compulsory liquidation
Once a WUP is ordered, you won’t be able to stop the company from being wound up. The company will be placed into compulsory liquidation, and the company bank accounts will be frozen.
With the issuing of a winding-up order, the OR or IP will liquidate your company and its assets. The proceeds from these are used to repay the creditors.
Ignoring a WUP is extremely ill-advised. If you don’t pay the amount specified, the company will be wound up via compulsory liquidation. The company will cease to exist, and you may be personally liable if you have any personal guarantees, or you’re found guilty of wrongful trading.
A judge can decide to dismiss a petition if they think a company is able to pay back a reasonable portion of the debt. It can also be dismissed if the judge believes the petitioner has abused the process. Other grounds for a petition’s dismissal can include: abuse of the process by the petitioning creditor, the amount of debt is not proven, or an agreement has been reached, and/or the amount has been paid.
You can stop a WUP from closing your company, but only if you act fast and before it goes any further. One of the ways you can stop the WUP is paying the amount specified. You can also dispute the debt with help from a solicitor or insolvency practitioner. If the petition is yet to be advertised, you can apply for an insolvency procedure.
How you can stop a winding-up petition
A creditor who is owed a minimum of £750 can file a WUP to collect the debt they are owed. A petition is usually a last resort when all other attempts to recover the money have failed. HMRC can issue these if a business doesn’t pay its tax contributions on time.
What to do if HMRC want to wind up your company
The debtor company can dispute a WUP, or a barrister or insolvency practitioner acting on their behalf.
If you wish to challenge a WUP, you only have seven days to do so, and so should do it as soon as possible. Once the winding-up order is issued, you won’t be able to stop the company going into compulsory liquidation.
As a limited company has limited liability protection, most of the company’s debts will remain separate from your personal finances, unless you have signed personal guarantees. You could also be personally liable if, during the liquidators’ investigation, you’re found guilty of wrongful trading.
More information about wrongful trading
At what point you pay the debt depends entirely on how it will affect you. As mentioned above, before repaying the petitioning debtor after a WUP has been issued, it is always wise to take advice from a solicitor specialising in insolvency. You can also contact us for free, confidential advice. If you pay before advertising, you are likely to avoid any damaging impact on your business. If you pay after advertising, you risk other creditors piggybacking off the action. If you’ve already paid the debt before the petition was filed, you can dispute it, as long as you have proof of payment.
You will need to contact the creditor or court of issue, ideally after taking professional advice.
How we can help
Contact us as soon as possible to stop the petition before it escalates further. We can help you deal with this whether you want to pay off the debt or just get some advice. Our initial advisors offer free, impartial advice with no obligation, and can help put you on the best route towards relieving your debts.