What is a Winding Up Petition?
A winding up petition is a way by which an unpaid creditor can petition the courts to force an insolvent company into compulsory liquidation. Any creditor who is owed more than £750 can present a winding up petition to the courts.
After they have received a winding up petition, the courts will hold a hearing to establish if the company is truly insolvent and cannot pay its debts. If the company is deemed insolvent, the court will issue a winding up order and will appoint an Official Receiver to liquidate the insolvent company.
What Does a Winding Up Petition Do?
In short, a winding up petition starts the process that will end with the termination of the company if left unchallenged. It’s the first step in a compulsory liquidation of the company, where a liquidator will realise the company’s assets and distribute the proceeds to the company’s creditors.
Why is it Serious?
In addition to the serious consequences, compulsory liquidation is a very public process – it will be a matter of public knowledge that the company’s creditors have forced it into liquidation. Additionally, once the petition has been advertised, the banks are likely to freeze the company’s bank accounts, effectively stopping it from trading from that date.
Who can Issue a Winding Up Petition?
Any creditor who is owed more than £750 can issue a winding up petition. They should have given the company plenty of opportunity to pay the outstanding debt, and the petition will have been preceded by a Statutory Demand or a court order. The creditor must wait 21 days after issuing the Statutory Demand before they are allowed to issue a winding up petition.
HMRC issue the most winding up petitions each year, but any creditor who’s owed more than £750 is entitled to do so.
Can you Stop a Winding Up Petition?
The answer to this question very much depends on how long has elapsed since the winding up petition has been issued. The rule of thumb is that the faster you take action, the better chance you will have of stopping the petition from being advertised in The Gazette and/or proceeding to the court hearing. You should seek professional advice as soon as you receive a winding up petition to help you work out your next steps.
What is the Difference Between a Winding Up Petition and a Winding Up Order?
The winding up petition is the legal notice that the creditors file with the courts requesting that they have a hearing to establish whether the debtor company is insolvent. The winding up petition can be said to start the compulsory liquidation process. As discussed above, it is still possible to halt the compulsory liquidation process once a winding up petition has been issued.
By contrast, the winding up order is the order made by the courts after the court hearing. The order signals the moment that the company goes into liquidation and will also appoint an Official Receiver to act as liquidator. Winding up orders can’t be reversed except in very, very limited circumstances – once the order has been made, the company will almost certainly be wound up.
We Can Help
If you’ve received a winding up petition or are facing creditors threatening to issue a winding up petition, we can help. Call us on 0208 444 2000 to discuss or email firstname.lastname@example.org.
Written by: Simon Renshaw