Sometimes the tiniest threats are the most dangerous because at first glance they look so small and insignificant. 

Mosquitos are one of the best examples of something having an outsized effect on its targets and in the business world, the winding up petition (WUP) can too as it can be brought by an unpaid creditor for a relatively small amount but could end with the ultimate closure of the business because of it. 

Find out why the winding up petition has to be treated seriously and answers to a lot of the other most common questions we receive from business owners and directors who’ve received one.

Who can file a WUP? 

Creditors, including suppliers, lenders, and other business entities, can file a winding up petition against a company that owes them money.

How much debt is required to file a WUP? 

Creditors can pursue a winding up petition for unpaid debts of as little as £750.

What happens after a WUP is granted? 

If the court grants the petition, a liquidator is appointed to sell the company’s assets, pay off creditors, and distribute any remaining funds to shareholders.

Can I continue to trade if I have received a WUP? 

In most cases, once a WUP has been filed a company’s bank account is frozen, in order to release cash to continue to trade you would need to apply to the court for a validation order. 

However, if the company is insolvent then you should cease trading immediately. 

What are the effects of a WUP being filed against my company? 

Once the petition has been advertised in the London Gazette, your company is exposed to:

  • Frozen bank accounts
  • Reputational damage
  • Potential staffing problems
  • Additional creditors attaching themselves to the petition
  • Potential lease terminations – under some lease agreements, these can be triggered automatically

Are WUPs and statutory demands the same thing?

No. A statutory demand is a seper\ate legal process where a creditor formally asks for owed money to be repaid. If ignored or not settled after 21 days then the creditors can seek a WUP as the next stage. 

Can a company challenge a WUP? 

A company can challenge a WUP within seven days of receiving the petition before it will be advertised in the London Gazette. by demonstrating that the debt is disputed, already paid, or there are other legal grounds to dismiss the petition. 

If I can repay the amount but not straight away – what are my options? 

If your business will be able to pay the debt but not immediately, it may be possible to come to a formal agreement with HMRC. 

There are two options, a Time to Pay (TTP) arrangement for HMRC debts only or a Creditors Voluntary Arrangement (CVA) if you have other outstanding debts. Either option will allow you to be able to repay the debt over an agreed longer timescale in predefined instalments. 

My business is going into administration – what will happen to any served winding up petitions?

Entering administration automatically freezes all creditor actions against a business including winding up petitions as part of a moratorium.

During this time, an external administrator will be able to come up with the best strategy for the business to proceed.

What are the consequences of a WUP for directors? 

Directors could face personal liability if they are found to have acted wrongfully, leading to the company’s insolvency. They may also be disqualified from acting as directors in the future.

Every business is different and the situations they find themselves in are different too. Our “BRE Answers” series is not meant to be complete or exhaustive but to provide a basic explainer. 

If you want to know more about winding up petitions and what to do if you receive one please get in touch with us! 

After a free consultation with one of our team of expert advisors you’ll be in a better position to choose your next move and probably with a better range of options than you originally thought you’d have. 

All you have to do is pick the best time and date for you and we’ll do the rest.