If you’ve received a winding up petition, discover next steps and expert advice from licensed insolvency practitioners McAlister & Co.
When your company receives a winding up petition, it can feel like the beginning of the end. The fear, confusion, and urgency can be overwhelming, especially if it’s come out of the blue or you weren’t expecting legal action.
But while the situation is serious, it’s not hopeless. With quick action and the right professional support, there are still powerful options available to protect your business, your reputation, and your future.
At McAlister & Co, we understand just how stressful and destabilising this experience can be – not just for directors, but for your staff, clients, and stakeholders too.
With that in mind, read on to learn what a winding up petition means, what steps you need to take, and, most importantly, how to take back control with confidence.
What is a Winding Up Petition?
A winding up petition is a formal legal action taken by a creditor with the aim of forcing your company into compulsory liquidation. It is one of the most serious steps a creditor can take and is usually used as a last resort, when other attempts to recover the debt have failed or been ignored.
The petition is filed at court and served on your company, and from that moment onwards, the consequences can unfold quickly.
If the debt is not paid or formally disputed within a short timeframe, the case proceeds to a court hearing. If successful, the result is a winding up order, which means that your company is officially closed down, its assets are liquidated by a court-appointed liquidator, and any remaining proceeds are distributed to creditors.
It’s important to understand that a winding up petition is not the same as a statutory demand. A statutory demand is a formal request for payment and is often the first step in the debt recovery process. A winding up petition, by contrast, is a public and legally binding action that can lead to your business being frozen, investigated, and ultimately dissolved.
At this stage, doing nothing is not an option – but with the right support, you can still act to prevent the worst-case outcome.
Why Are Winding Up Petitions Issued?
Winding up petitions are usually issued when a creditor is owed £750 or more, and the company has failed to repay or dispute the debt despite prior warnings. The most common petitioning creditor is HM Revenue & Customs (HMRC), often due to unpaid VAT, PAYE or Corporation Tax.
Other creditors may include suppliers, lenders, landlords or trade creditors. Once a petition is filed, it may also attract attention from other creditors who can choose to support the petition, applying even more pressure on the company.
Next Steps if You’re Faced with a Winding Up Petition
Being served with a winding up petition is understandably overwhelming. However, it’s vital to remember that time is your most valuable asset. The sooner you act, the greater your chances of resolving the situation successfully. If you’re served with a winding up petition, here’s what you should do immediately:
1. Don’t ignore the petition
Even if you believe the debt is disputed, or that the issue will resolve itself, do not ignore the petition. The process is already in motion, and inaction can lead to your accounts being frozen and the company being forced into liquidation. Treat it with urgency and seek professional support straight away.
2. Speak to a licensed insolvency practitioner
You should contact a licensed insolvency practitioner as soon as possible, ideally within 24–48 hours of receiving the petition. At McAlister & Co, we can quickly assess your situation and explain your options, including how to stop or challenge the petition, or how to protect the business through a formal insolvency solution like a CVA or administration.
3. Check the petition details carefully
Ensure the petition is accurate and valid. Is the debt amount correct? Was it properly served? Has the company previously disputed the debt? If there are errors or legitimate grounds for dispute, legal action can be taken to challenge or dismiss the petition before it progresses further.
4. Take urgent steps to prevent advertisement
You have up to seven days from the date of service before the petition may be advertised in The Gazette. If that happens, your business bank accounts could be frozen and the situation made public. This makes early action absolutely critical, as once the winding up petition is advertised, stopping the process becomes far more complex.
5. Consider repayment or negotiation
If the debt is genuine and you can afford to pay it – even via instalments – now is the time to negotiate with the creditor. Settling the debt early could lead to the petition being withdrawn. Plus, even if you can’t pay in full, we may be able to help you propose a settlement or restructure your obligations.
6. Explore formal rescue options
If repayment isn’t viable, your insolvency practitioner can advise on formal options such as a company voluntary arrangement (CVA), administration, or pre-pack administration – each of which can stop the petition and give you time to restructure, refinance, or plan for recovery.
7. Protect yourself as a director
As a director, you have a legal responsibility to act in the best interests of your creditors once your company is insolvent. Taking advice early helps you fulfil your duties, avoid accusations of wrongful trading, and reduce the risk of personal liability or director disqualification.
What is the Winding Up Process?
1. Petition Issued
The winding up process begins when a creditor files a petition at court, requesting that your company be wound up due to unpaid debts. Once issued, this petition must be formally served to your company, usually in person.
This moment marks the start of a very short timeframe to act, and it’s essential that you don’t ignore it. From this point, your business is at risk of compulsory liquidation unless immediate steps are taken to challenge or resolve the debt.
2. Notice Period (7-Day Window)
Once the petition has been served, you have a strict seven-day period in which to respond before the petition is advertised in The Gazette. The petition can be advertised any time up to seven days before the scheduled hearing, so it’s important to act fast. At McAlister & Co, we have a wealth of experience negotiating the delay in advertising the petition, ensuring you are able to put a plan in place.
This time period is the crucial window to either pay the debt, dispute the claim, or seek professional insolvency advice to explore rescue options. Failing to act in this period dramatically increases the risk to your company and restricts the solutions available.
3. Gazette Advertisement
If the petition remains unresolved after seven days, it will be advertised in The London Gazette. This makes the situation public, alerting banks and other creditors.
In most cases, banks will freeze your company’s accounts almost immediately, preventing access to funds and potentially halting operations. Other creditors may also learn of the situation and take their own legal action, compounding the pressure.
However, all is not lost: if the petition is advertised, it is possible to arrange an application for a validation order to be put forward, allowing your business to trade in the interim.
4. Court Hearing
The petition is then scheduled for a court hearing, typically around 8–10 weeks after submission. At this hearing, a judge will determine whether your company is insolvent and whether a winding up order should be granted.
You may attend the court hearing with legal or insolvency representation to argue for an adjournment, dispute the debt, or demonstrate that alternative arrangements are underway, such as a proposed company voluntary arrangement.
5. Winding Up Order & Liquidation
If the judge rules in favour of the creditor, a winding up order is made, and your company is placed into compulsory liquidation.
At this point, control of the company passes to the Official Receiver or a court-appointed liquidator. Their role is to investigate the company’s affairs, sell off any assets, and distribute proceeds to creditors. The business is closed and will eventually be struck off the Companies House register.
The Legal and Financial Consequences of a Winding Up Petition
If a winding up petition is ignored or not dealt with swiftly, the consequences can escalate very quickly and become extremely difficult to reverse.
One of the earliest and most disruptive outcomes is the freezing of your business bank accounts, which often happens as soon as the petition is advertised in The Gazette. Without access to funds, paying staff, suppliers, rent, or essential operating costs can become impossible, bringing day-to-day trading to a sudden halt.
Beyond the immediate financial impact, the reputational damage of a winding up petition can also be significant. Clients, suppliers, lenders, and even employees may become aware of the petition and lose confidence in the business, leading to cancelled contracts, withdrawn credit terms, or key suppliers refusing to trade. In many cases, this loss of trust can be just as damaging as the debt itself.
If the court ultimately issues a winding up order, directors lose control of the company entirely. The business is then placed into compulsory liquidation, and a court-appointed liquidator takes over. Their role includes selling the company’s assets, investigating its financial affairs, and reviewing the conduct of the directors leading up to insolvency.
This is where the personal risks for directors increase. If it is found that the company continued trading while insolvent, or that directors failed to act in the best interests of creditors once insolvency was inevitable, they could face personal liability, claims for wrongful trading, or even director disqualification.
Taking early advice and acting decisively is therefore not just about saving the business – it’s also about protecting yourself and meeting your legal duties as a director.
How to Respond to a Winding Up Petition
1. Seek Immediate Professional Advice
This is not the time for delay. As soon as a winding up petition is received, you should contact a licensed insolvency practitioner straight away. They are uniquely qualified to provide urgent advice and explore formal rescue options that could stop the petition and protect your business.
Waiting too long can limit your choices and increase the risk of compulsory liquidation. At McAlister & Co, we respond quickly to help you make informed decisions from day one.
2. Check the Validity of the Petition
Not all petitions are issued correctly or based on accurate information – which means there may be grounds to dispute the petition if the debt is not actually owed, if it’s already been paid, or if the petition was improperly served.
Legal or procedural errors could result in the petition being dismissed, so it’s important to seek legal advice in order to assess the strength of any defence and take appropriate action before the situation escalates.
3. Negotiate a Payment Plan
If the debt is genuine and the company has the means to repay it, even in instalments, you should attempt to negotiate directly with the creditor. Many creditors, including HMRC, would prefer to recover funds through a reasonable payment plan rather than push the company into liquidation. Time is a factor here, as creditors are less likely to cooperate once the petition has been advertised.
4. Apply for an Adjournment
If you need more time to organise payment, raise funds, or implement a rescue strategy, your solicitor can request an adjournment from the court. This temporarily pauses the process, buying valuable breathing space to prepare a company voluntary arrangement, secure investment, or explore administration options. Courts will usually consider adjournments favourably if there’s a genuine rescue plan underway.
5. Pay or Settle the Debt
Where funds are available, settling the full debt, including the petitioning creditor’s costs, can bring the process to an end. However, this must be done before the court hearing and ideally before the petition is advertised.
Once it has been advertised, the situation becomes more complicated, as other creditors can step in and continue the petition even if the original creditor has been paid.
6. Consider Formal Insolvency Options
If repayment isn’t possible, formal insolvency solutions may offer a more strategic and controlled way forward. Options like a CVA, administration, or pre-pack sale can halt the petition and protect the business while addressing its financial challenges.
A licensed insolvency practitioner will assess your company’s financial position and recommend the most appropriate route based on viability, creditor relationships, and long-term sustainability.
How to Prevent a Winding Up Petition
Taking things back a step, how can you prevent a winding up petition in the first place? In this situation, the best defence against a winding up petition is a strong and proactive offence – and in business, that means staying ahead of your financial challenges before they escalate.
Prevention starts with vigilant cash flow management. Regularly reviewing your incomings and outgoings allows you to spot potential shortfalls early and make informed decisions about how to handle them. Even businesses with strong sales can fall into insolvency if cash flow isn’t properly managed.
Monitoring your debt obligations – including taxes, supplier invoices, and loan repayments – is just as crucial. If you find that payments are slipping, or that you’re relying heavily on credit facilities or director loans to meet day-to-day costs, it could be an early warning sign of deeper financial distress.
Additionally, if you’re already struggling to meet tax obligations, don’t wait for HMRC to take action. Instead, speak to them early and consider applying for a Time to Pay Arrangement. This can allow you to spread your tax payments over a longer period and avoid enforcement action, including winding up petitions. HMRC is often willing to be flexible, provided they believe your business is viable and you’re acting in good faith.
Transparent, open communication with other creditors can also make a significant difference. Many suppliers and lenders would rather agree to revised terms or a short-term payment plan than initiate costly and time-consuming legal action.
Ultimately, one of the most effective ways to avoid a winding up petition altogether is to seek advice from a licensed insolvency practitioner at the first sign of trouble. Far from being the last resort, early intervention can give you access to a wide range of business rescue tools – from informal arrangements and cash flow planning to formal procedures like CVAs – that can resolve issues before they spiral.
Remember, taking action early is not a sign of failure; it’s a sign of responsible leadership.
Alternative Solutions to Winding Up
1. Company Voluntary Arrangement (CVA)
A company voluntary arrangement is a formal, legally binding agreement between your company and its creditors to repay debts over time – typically over three to five years. It allows the company to continue trading while restructuring its liabilities, and it immediately halts all legal actions, including any winding up petition.
A CVA must be approved by 75% of creditors by value, and once in place, gives the business a fighting chance to return to profitability. It is most effective when the business is fundamentally viable but cash-strapped. Learn more about how the CVA process works here.
2. Administration
If the business is under immediate threat, administration can provide vital legal protection. Once a company enters administration, an automatic moratorium is put in place, preventing any creditor from taking legal action without court permission.
An insolvency practitioner takes control, with the goal of rescuing the business, selling it as a going concern, or achieving a better result for creditors than liquidation. Administration is often used to create breathing space while exploring a sale or restructure.
3. Pre-Pack Administration
A pre-pack involves arranging the sale of a company’s assets before it enters administration, with the sale completing immediately after the administrator’s appointment. This allows for continuity of the business, often with the same directors forming a new company to take over operations.
It’s a fast and efficient way to preserve jobs and value, but must be conducted transparently, with an independent evaluator and proper advice to ensure creditor interests are protected.
4. Creditors’ Voluntary Liquidation (CVL)
When recovery is not feasible, a creditors’ voluntary liquidation allows the directors to close the business in a structured and lawful way. Rather than waiting for a winding up order, directors take the initiative to appoint a liquidator and wind down operations. This often results in a better outcome for creditors and reduces the risk of wrongful trading allegations against directors.
It’s a dignified exit that can also open the door to starting afresh, with expert guidance on director duties and legal obligations.
How McAlister & Co Can Help
At McAlister & Co, we are licensed insolvency practitioners and business rescue specialists. Yes, we know the stress and urgency that come with a winding up petition – but we also know how to fix it. We offer free initial advice, clear, honest recommendations, and tailored solutions based on your business needs.
If your company has received a winding up petition or is at risk, don’t wait. The sooner you act, the more options we can offer. Book a confidential consultation with McAlister & Co today and take the first step towards resolution.
Whether you’re disputing a debt, seeking a CVA, or considering administration, we’re here to help you protect your business and your future.
Frequently Asked Questions (FAQ)
What’s the difference between a statutory demand and a winding up petition?
A statutory demand is a formal notice requesting payment of a debt. If ignored, it can lead to a winding up petition. The petition itself is a court application to forcibly liquidate your company due to unpaid debts – a much more serious and urgent threat.
Can I stop a winding up petition once it’s started?
Yes, but it depends on how early you act. If the debt is paid, disputed, or subject to a formal rescue procedure like a CVA or administration, the petition can be dismissed or adjourned. However, once the petition is advertised, the situation becomes significantly more difficult to manage.
How long do I have to act?
You typically have just seven days from the date the petition is served to prevent it being advertised. Acting within this window is critical – after that, your options are much more limited, and the consequences are more severe.
What happens if my bank account is frozen?
If your petition is advertised in The Gazette, banks are likely to freeze your company’s accounts as a precaution. This can prevent you from paying staff, suppliers, or rent, effectively crippling the business. It’s another reason to act before day eight.
Can I trade while a petition is ongoing?
You can technically continue trading, but it carries significant risk. If your company is insolvent and continues to trade, directors could be held personally liable for worsening the position of creditors. Always seek advice before deciding to continue operations.
Can I still be a director if my company is liquidated?
Yes, you can remain a director of other companies, unless you are disqualified or face action for misconduct. However, there are restrictions if you intend to reuse the same company name – a specialist insolvency practitioner can guide you on these rules.
Is a winding up petition public?
It becomes public once advertised in The Gazette. Before that point, it remains private. Once public, it can seriously damage your company’s reputation and relationships with clients, lenders, and suppliers.
Will other creditors get involved once a petition is filed?
Yes, once the petition is advertised, other creditors can “support” the petition and apply pressure of their own. This often accelerates the company’s descent into liquidation if not handled swiftly and professionally.
