Winding up petition – What does it mean for my company?

A winding up petition (petition) is usually presented by a creditor of a company, although it may be presented by the company itself or a shareholder, making application to the Court to have the company placed into Compulsory Liquidation by the granting of a Winding Up Order. 

The most common ground for a petition is that of insolvency, or a company’s inability to pay its debts.  A company may be deemed to be unable to pay debts if:

• a creditor is owed more than £750 and has served a written demand and three weeks have passed without the debt being paid or secured to the satisfaction of the creditor
• execution issued on a judgement or order of any court is returned unsatisfied in whole or in part
• If proved to the satisfaction of the court that the company is unable to pay its debts as they fall due
• If proved to the satisfaction of the court that the value of the company's assets is less than the amount of its liabilities

The primary motivation for creditors issuing a petition is to recover any outstanding payments.

How the process works

Creditors will typically ask a solicitor to issue proceedings.  A petition is issued and a date set by the court to "hear" the petition. The petition must be served at the company’s registered office and advertised.. If a company fails to respond, or doesn’t act to mount a defence, then the judge will move to issue a Winding Up Order and the company will be placed into liquidation.

When the company receives a Winding Up Petition it is important that Directors fully address their responsibilities or they may be left open to accusations of Wrongful Trading if the Insolvent company is mis-managed. If Directors are found guilty of Wrongful Trading they can be made personally liable for company debts.

Winding Up Petitions – What action can a company take?

Once a company has received a  petition there are a number of actions they can take. If the originating debt is not disputed seeking advice from an Insolvency practitioner at an early stage will allow you to consider all options.  Considering a Company Voluntary Arrangement (CVA) or Administration may allow a moratorium to be effected protecting the company from further action whilst the position is considered and a restructuring strategy put in place, including a Company Voluntary Arrangement (CVA).