Business Rate Review

Winding-up petitions return – Government remove WUP restrictions

Authored by Ruth Jacks

Ruth Jacks

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Approximate read time: 3 minutes

With the extended restrictions on creditor enforcement action set to lift on 30th September, winding-up petitions (WUPs) are set to once again be used by creditors. With the furlough scheme set to come to an end at the same time, what does it mean for companies and what can a company do if they receive a winding-up petition?

What has changed?

The restrictions in issuing winding-up petitions also related to statutory demands and were initially set to be in place from 1st March 2020 until 30th September 2020. However, with the country going in and out of lockdown, many companies were unable to trade again normally. The restrictions were set to end on 31st July 2021, but were once again extended until 30th September 2021.

The government have also introduced temporary new legislation changing the way in which businesses receive winding-up petitions.

  • The threshold to issue a WUP is now £10,000, an increase on the current £750, in order to stop businesses issuing winding-up petitions for relatively small debts.
  • Creditors now also have to seek proposals for payment from a debtor, giving them 21 days for a response before they can take action with a winding-up petition.

What impact will the change have?

Now that WUPs are no longer suspended, companies which have arrears may receive a petition and there could be an influx as creditors look to get what they are owed.

A winding-up petition represents the most serious attempt by a creditor to reclaim the debts they’re owed, however, with a higher threshold for using WUPs there may be less issued. But with a higher threshold of £10,000, it could also suggest that a company has serious problems if they owe that amount of money.

If winding-up petitions are unpaid, or unprotested, once it’s advertised in the London Gazette, your company bank accounts will first be frozen. This will stop a company from being able to pay for the day-to-day running of the company, their bills and staff. Furthermore, if it’s still unpaid it can result in the forceable closure of your company. Speaking to a licensed insolvency practitioner about the situation will put you in the most favourable position moving forward.

If my company receives a winding-up petition what can I do?

If the core business is viable, but overwhelming debts have made it unworkable, there are several rescue alternatives available. The amount of time the company has before the petition is issued will dictate which of these options are feasible.

  • Formal Repayment Plan – Also known as a Company Voluntary Arrangement (CVA) allows companies to repay their debts in affordable monthly instalments over five years. If a CVA is agreed, the winding-up petition will be removed and a formal repayment plan will be made with the debtor, as well as any other outstanding creditors you have. The process will enable you to keep the business trading without creditor pressure.
Find out more about CVAs here
  • Close the company yourself – A Creditors Voluntary Liquidation (CVL) is only available if the petitioning creditor agrees to drop the petition — petitioning costs will usually need paying, and the creditor may request some provisos before doing so. If you have assets within the business
See more on how CVLs work
  • Pay the petition – If you’re able to, the best practice is to always pay the petitioning creditor for the amount you owe.
  • Contest the petition – You can oppose a winding-up petition, if you believe that you do not owe the debt, the debt in question is wrong or that you have already paid it.

In summary

As we continue to return to normality, the return of winding-up petitions is just another step. It means there is no longer a break for companies struggling to pay their outstanding debts, and they could be wound up, forcing to compulsory closure. There are means of dealing with winding-up petitions, but at the moment, this is just another step to the return of normality.


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