What is a Winding Up Petition?


In the UK, businesses experiencing financial difficulties can end up facing something called a winding up petition. Typically used by creditors who are concerned that they won’t be repaid, it’s a way for those creditors to try to force a compulsory liquidation of the company in question so that they can get their money back. Here’s what you need to know about winding up petitions, whether you’re a creditor or an indebted business.

Who initiates a winding up petition?

A winding up petition can be requested by creditors who are owed more than £750 by a company. Creditors will issue the petition to a court, and it must also be served to the registered office of the business being targeted. The petition should include a hearing date, and after a certain period of time, it will also be advertised in The Gazette, an official record journal. 

When can a petition be filed?

Winding up petitions aren’t typically something that will be issued if a company is simply a little late on repaying a date. It will generally be issued if the creditors reasonably believe that the company in question is not just unwilling but unable to repay their debts – in other words, if the company is insolvent. Other reasons could include if the company is being run in a prejudicial or otherwise illegal manner, or if the shareholders are no longer capable of working together in an effective manner. All of this will need to be substantiated in the application.

The court process

When creditors petition a court, it will initiate a complex legal process to ascertain whether the company should in fact be wound up. The court will examine the petition in detail, to decide whether or not the creditors can provide clearly legitimate grounds that winding up the company is the only way they will receive what’s owed to them.

What happens if the petition is successful?

If the winding up petition is successful and the court decides to grant the order, then the business in question will enter into a process of compulsory liquidation. This will mean that the company will be forced to cease trading, and will have to sell off its assets so that it’s able to at least partially repay its debts.

A liquidator will be appointed from a company who will oversee the sale of assets and then ensure that the resulting proceeds are distributed in legal order of priority to the creditors. The liquidator will also examine the company in detail, ensuring that it is run in an appropriate manner. If they suspect that any of the directors acted outside of the law, they may bring in other investigators to explore the matter further.

Whether you’re considering petitioning for a winding up order or you believe that your business may face such an order soon, it’s important to seek the right advice. The implications of a winding up order are serious, especially for businesses facing insolvency, and it’s important that you get professional help throughout the process.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.