Winding up Petitions and Orders: Process and Procedure

What is the process for issuing a winding-up petition?

• The creditor files for a Winding Up Petition. 
• The company must reply within 7 days. 
• The petition gets publicised in the Gazette.
• The company’s bank accounts are frozen. 
• A Winding Up Order is approved.
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How much does it take time to process a winding-up petition?

A Winding Up Petition (WUP) is a legal request made to the court by a creditor to push an insolvent company into liquidation because of unpaid debts. It’s often the last resort for a creditor after all other efforts to recover debts have been unsuccessful.

You can be certain that any creditor initiating this action fully intends to liquidate your company. A winding-up petition is more than just a mere threat and demands serious attention.

 

A step-by-step guide to winding up petition

Winding Up Petitions are a court-driven process and, accordingly, must adhere to a precise procedure outlined below:

1: The creditor files for a Winding Up Petition 

Creditors typically start by issuing a formal claim for payment, called a statutory demand, to recover a debt. If the debt remains unpaid after 21 days, the creditor can petition the courts for the company’s compulsory liquidation through a Winding Up Petition. 

The creditor submits the petition to the court and serves a copy of the insolvent company.

Any creditor, including HMRC, can petition for the winding up of a company if they are owed a minimum of £750. However, initiating a Winding Up Petition is a costly process, requiring the creditor to pay court fees of £302, along with a court deposit of £2,600.

Once a winding-up petition has been served on your company, you’re prohibited from selling any of the company’s assets from the petition’s date. Any transactions would be considered post-petition dispositions and could be voided under s127 of the Insolvency Act 1986.

 

2: The company must reply within 7 days

After the issuance of the winding-up petition, time is critical. If you wish to challenge the petition or have it rescinded by the petitioning creditor, you have seven days to take one of the following actions:

• Pay the debt in full or negotiate 
• An acceptable alternative arrangement with the creditor, such as a payment plan.
• Raise a challenge if you dispute the debt or disagree with the amount owed.
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If none of the above options are feasible, it’s crucial to seek advice from a licensed insolvency practitioner promptly. 

While you can only pursue a Creditors’ Voluntary Liquidation (CVL) with the creditor’s permission, there might still be time to propose a Company Voluntary Arrangement (CVA) if you can demonstrate your company’s viability moving forward.

 

3: The petition gets publicised in the Gazette

Once the seven days have passed, a notice of the winding up petition will be published in the Gazette, making the situation public.

For companies served with a winding-up petition, the situation typically escalates from this point onwards. As other creditors become aware of the petition, continuing to trade can become exceedingly difficult, if not impossible, at this stage.

 

4: The company’s bank accounts are frozen

Once the petition is advertised, the insolvent company’s bank will become aware of the situation. Typically, the bank will freeze the company’s account to prevent directors from unlawfully selling assets or worsening the position of outstanding creditors, including themselves.

A frozen business bank account typically halts operations. Access to the bank account may be reinstated by obtaining a validation order, although this process can be difficult and often costly.

 

5: A Winding Up Order is approved

If the court grants the Winding Up Order, it initiates the compulsory liquidation of the company. An Official Receiver (OR) will be appointed immediately to serve as the liquidator of the insolvent company. 

At this stage, there is nothing that can be done to prevent the company from being liquidated, essentially signifying the end of your business.

The Official Receiver will investigate the directors’ actions in the period leading up to the company becoming insolvent to determine if any wrongful trading or antecedent transactions took place. While rare, if the directors are found guilty of such activities, they may face disqualification from acting as directors of any company for up to 15 years and/or being held personally liable for some of the company’s debts.

 

Read More:  

• Defending a Winding Up Petition: Can a Winding Up Petition be withdrawn
• Defending a Winding Up Petition
• Can I wind up my own company
• What happens when a Winding Up Order is made
• How can a Winding Up Petition be set aside

 

Thinking about stopping the winding up petition process? 

If your company has received a winding-up petition or if you anticipate your creditors may take this action soon, contact the experts at Vanguard Insolvency today. Arrange a free consultation to gain insight into your current position and understand the implications of a winding-up petition for your business.