How to respond to a winding-up petition: A step-by-step guide

If you’ve received a petition for winding up of company, it’s usually a signal one of your creditors is taking formal action to close your business due to unpaid debts.

The steps you take in response, particularly before a petition is advertised, can make the difference between saving your business or seeing it forced into liquidation.

What to do if you receive a winding-up petition

Here’s how you can respond to a winding-up petition in the UK to minimise risk and maximise your chances of a successful defence or settlement.

Step 1: Act within seven days

If you receive a winding-up petition, don’t wait.

You have a small window before the petition is advertised, and after that point your options narrow.

Step 2: Check for errors or disputes

Examine the petition to determine whether it relates to a genuinely undisputed debt and if all the procedures have been correctly followed.

If there are errors, your legal team can apply for an injunction to stop the advertisement and request the petition be struck out.

Step 3: Seek immediate insolvency advice

An insolvency practitioner can act as the middle person and will help assess your financial position, communicate with the petitioner, and advise on your options.

Your priority here is to seek professional compulsory liquidation advice.

Step 4: Negotiate or pay the debt

If it’s determined the debt is valid and payment is feasible, a good option is to settle it promptly.

Once done, obtain written confirmation from the creditor the petition will be withdrawn.

If your company is unable to make full payment, try to negotiate a payment plan or time-to-pay arrangement.

Step 5: Prepare for court if necessary

If, despite your best efforts, the petition proceeds to court, prepare all the related documentation.

Any documented evidence showing evidence of previous payment, disputes, or proposed restructuring that will help with clearing off the debt.

While a winding-up petition can seem like a death sentence, that isn’t entirely true.

In some scenarios, if you or your company directors take quick and decisive action, you might be able to save your company and avoid liquidation.

Once the petition is filed, it’s served at your company’s registered office.

Unless an injunction is granted, or the debt settled or disputed in time, the petition is typically advertised in The Gazette after seven days.

Understanding the winding-up process

Since a winding-up petition is a legal process, there are a series of steps that must be taken before a company is liquidated.

They are:

Statutory demand (Optional)

Normally, before a petition for winding up of company is filed, most creditors will issue a statutory demand.

This is a formal written demand for payment of a debt above £750.

If unpaid within 21 days, the creditor may proceed to petition.

Winding-up petition filed

A creditor files the petition, and the court begins the process of issuing a winding-up petition.

It is the first official legal step in the process.

Petition served on company

The petition is delivered to your company’s registered office, officially notifying you of the proceedings.

Petition advertised

Seven days after the petition has been served, it may be publicly advertised unless you stop it by paying your creditors, disputing the petition, or applying for an injunction.

Court hearing

A court hearing is typically scheduled within 6–8 weeks after a petition is filed.

During this hearing, the court will decide whether to grant the winding-up order and determine the future of your company.

The scheduling of a hearing can vary as a result of HMRC backlogs or court adjournments requested by either party.

If the court finds the debt valid, undisputed and you have yet to honour your debt, it will issue a winding-up order.

Your company enters compulsory liquidation, and control passes to the Official Receiver or an appointed liquidator.

Legal risks for directors and the business

If a winding-up order is granted, an official receiver or liquidator is appointed to oversee the process.

At this point, directors are also no longer acting primarily in the interest of shareholders.

Instead, they’re legally required to act in the best interests of the company’s creditors.

If they continue to trade while insolvent, or fail to take prompt and reasonable steps to resolve the debt, it may result in personal liability under the wrongful trading provisions of the Insolvency Act 1986.

If the court concludes the directors allowed the company to continue operating when there was no reasonable prospect of avoiding liquidation, they may be ordered to contribute personally to the company’s debts.

When this happens, directors not only risk their own financial exposure, but also face disqualification for up to 15 years, reputation damage, and potential criminal sanctions if fraudulent behaviour or gross negligence is uncovered by the liquidator.

Consequences of ignoring a winding-up petition

Ignoring a winding-up petition or from a creditor is one of the worst, and costliest, mistakes any director or business can make.

Your best option is to take immediate and decisive action, as outlined above, to give your company its best chance at surviving this hurdle.

Key consequences of ignoring a petition include:

Frozen bank accounts

The first major effect once the petition is advertised in The London Gazette is most banks will freeze accounts to comply with the Insolvency Act 1986.

Compulsory liquidation

Another major effect of wilfully ignoring a winding-up petition is compulsory liquidation.

If you do not take the proper steps and the court grants the petition, your company is placed into liquidation and an official receiver or insolvency practitioner takes control.

Director investigations and disqualification

During liquidation, the appointed liquidator is legally obligated to investigate the conduct of directors during this period. They’ll be on the lookout for any evidence of wrongful trading, misfeasance, or other misconduct against creditors.

If any is found, directors can potentially be made personally liable and disqualified from acting as a director for up to 15 years.

How Irwin Insolvency can help with winding up petitions

Whether you need anything from HMRC winding-up petition help to compulsory liquidation advice, our team of experts are ready to assist.

We help you assess the validity of the petition, negotiate with creditors, explore alternative rescue strategies and even represent you in court.

Contact us today and arrange a consultation.

Winding Up Petition FAQs

What is a winding-up petition?

A winding-up petition is a legal means your creditors can use to force you to clear any debt owed to them.

A petition is the first step in a series, and can result in a company being forced into liquidation due to unpaid debts.

Despite its power, not all creditors immediately seek a winding-up petition. Most prefer to settle beforehand due to the costs involved and the risk a petition may be dismissed or defended.

What triggers a winding-up petition?

A winding-up petition isn’t only triggered when a company has incurred major debt; if your company owes a debt of more than £750 you can be subject to a winding-up petition.

In some cases, a creditor may issue a statutory demand to collect their debt before a petition to wind-up your company.

However, this is optional, and a creditor can petition to wind up a company without a statutory demand.

Who can petition to wind up a company?

Common petitioners include suppliers, lenders, or landlords of your business.

Additionally, HMRC is particularly active and often issues petitions to claim any unpaid VAT or corporate tax from a business.