Receiving a winding-up petition is a serious warning sign that your company is in financial distress. It means a creditor asks the court to force your company into compulsory liquidation due to unpaid debts. If you’ve received one, there is limited time to act, and how you respond can make a significant difference to the outcome.
This article outlines what a winding-up petition means, what happens next, and what actions you should take immediately to protect your company, your creditors, and your responsibilities as a director.
Understand What the Petition Means
A winding-up petition is a legal document issued by a creditor who is owed £750 or more and believes your company is insolvent. It is submitted to the court and served to your company, usually by a process server.
Once served, the petition becomes public, and the court will schedule a hearing — usually within 8 to 10 weeks. If no action is taken before that hearing, the court can issue a winding-up order, placing your company into compulsory liquidation.
If the petition is advertised in The Gazette, which can happen just seven days after service, it may trigger consequences. Your bank will freeze the company’s accounts, suppliers will withdraw support, and customers will lose confidence, causing irreversible damage.
Act Quickly — Time Is Limited
You have a short window to respond before the situation escalates. The earlier you act, the more control you retain over the outcome.
If the debt is disputed or already paid, you must respond immediately with evidence to the creditor and potentially to the court. If the debt is valid and your company cannot pay, you must consider formal insolvency options without delay.
Ignoring the petition could lead to compulsory liquidation, where control of the company is taken away from you and passed to the Official Receiver.
Seek Professional Advice Immediately
Once a winding-up petition is served, speak to a licensed insolvency practitioner or a solicitor with insolvency experience. They will help you assess your company’s position, explain your legal duties, and guide you through your options.
In some cases, there may still be time to enter a voluntary liquidation, which allows you to close the company in a more structured way. This proactive approach can reduce disruption and show that you are fulfilling your responsibilities as a director.
Explore Whether the Debt Can Be Settled or Challenged
Not all winding-up petitions result in liquidation. If the debt is inaccurate, disputed, or has already been paid, there may be grounds to challenge the petition. In these situations, time is critical.
You may be able to prove the debt is genuinely in dispute, submit evidence of payment, or negotiate a payment plan with the creditor. In some cases, you can apply for an injunction to stop the petition from being advertised, especially if it would harm the company’s ability to operate.
However, courts require strong evidence. A vague or unsubstantiated dispute will not stop the process. Legal advice can help determine whether you have a viable defence and how best to present it.
Consider a Creditors’ Voluntary Liquidation (CVL)
If your company cannot pay its debts and there is no realistic route to recovery, entering into a Creditors’ Voluntary Liquidation may be the most appropriate course of action. A CVL allows directors to take proactive steps to close the business while complying with insolvency law.
An insolvency practitioner is appointed to manage the liquidation. They will sell company assets, notify creditors, process employee claims, and formally dissolve the business.
This approach allows for a more controlled process than compulsory liquidation. It also gives directors an opportunity to demonstrate responsible conduct and reduce the risk of personal liability.
Understand the Impact on Your Employees and Creditors
Once a winding-up petition is served, uncertainty quickly affects those connected to the business. Employees may worry about losing their jobs, and creditors may push harder for payment, fearing they will not recover what they are owed.
If liquidation becomes unavoidable, employees may be eligible to claim redundancy pay, unpaid wages, and holiday pay through the government’s Redundancy Payments Service. Creditors will be repaid from any remaining company assets, but in most cases, this covers only a portion of what is owed.
Directors should maintain open communication with affected parties where appropriate and seek professional help to ensure the process is handled lawfully and transparently.
Don’t Attempt to Dispose of Assets or Favour Some Creditors
Once a winding-up petition has been issued, the liquidator may challenge any payments made or assets sold later. Directors must not prioritise certain creditors or attempt to reduce the value of the company’s estate.
Any action that disadvantages creditors or moves assets out of reach could lead to serious consequences, including personal liability or director disqualification. If you’re unsure about what you’re allowed to do, it’s best to pause and get advice before making any financial decisions.
Prepare for What Happens If the Petition Is Successful
If the court approves the winding-up petition, a winding-up order will be made, and the company will enter compulsory liquidation. The Official Receiver takes control, and directors are legally required to cooperate with the investigation and hand over company records.
This process includes a detailed review of how the business was run in the lead-up to insolvency. Directors may be interviewed and asked to explain financial decisions, particularly those involving company loans, asset transfers, or continued trading during insolvency.
Take Action Early to Protect Your Position
A winding-up petition is one of the most serious challenges a company can face. It can trigger account freezes, damage business relationships, and lead to forced closure if ignored. But if you act quickly, there may still be time to settle the debt, challenge the petition, or take control of the situation through voluntary liquidation.
Early, informed action gives you more options and helps you meet your legal duties as a director. If your company has been served with a winding-up petition, the most important step is not to delay.