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GETTING YOUR WINDING UP PETITION DISMISSED

Received a winding up petition? Acting quickly is vital to stop further legal action. Whether you need the winding up petition dismissed, or want to better understand your options moving forwards, our experts are here to guide you.

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What is a Winding Up Petition?

A winding-up petition is a serious legal step used by creditors to force a company into compulsory liquidation when it has been unable to pay back debts. Often seen as a last resort for creditors, a winding up petition is one of the most significant threats a business can face, as it can lead to the freezing of bank accounts, loss of control over the company, and ultimately, the closure of the business. 

Once a winding-up petition has been issued, it becomes public record. This can have serious knock-on effects as it will often deter suppliers, possible investors, and even potential clients. If your business has received one, urgent action is essential in order to explore available options for preventing its escalation and protecting your company. 

Threshold for a Winding Up Petition

In order for a creditor to file a valid winding-up petition, their circumstance must meet certain legal criteria: 

  • The debt must exceed £750. 
  • The debt must be undisputed, meaning the company has not formally challenged its validity. 
  • The creditor must have attempted to recover the debt through other means, such as via a statutory demand.

If these set conditions do not apply, you may have grounds to challenge, or even dismiss, the winding-up petition.

Received a Winding Up Petition? Here’s What to Do

Receiving a winding-up petition can feel overwhelming. Fortunately, there are some steps you can take to protect your business against the worst possible outcomes: 

  • Act Quickly: You only have seven days from receiving the petition before it will be advertised in The Gazette, which could severely harm your reputation and business relationships. 
  • Seek Professional Advice: Consult insolvency experts to explore your options. This will range from repayment plans to challenging the petition.
  • Defend the Petition: If the debt can be considered ‘disputed’, or the petition was procedurally flawed, you may have a case to get your winding up petition dismissed. Speak to your insolvency expert for more information on next steps.

What is the Winding Up Petition Procedure in the UK?

The formal process of a winding-up petition follows these steps:

  1. Petition Files: The creditor files a petition with the court for their debtor to be wound up, 
  2. Notice Sent: You will receive a copy of the petition.
  3. Hearing Scheduled: A court hearing is set to decide whether there are grounds to grant the winding-up order. 
  4. Advertisement in The Gazette: If granted, the petition will be made public after seven days, unless you’ve taken action to stop it. 
  5. Court Decision: If approved, a winding up order will be issued. This places your company into liquidation.

Gaining a clear understanding of this procedure can ensure you take the right steps at the right time.

Download our FREE Guide to Liquidation

If your business has received a winding-up petition, understanding the liquidation process is vital. If you aren’t able to get your winding up petition dismissed, or addressed in another way, it can easily lead to compulsory liquidation if not addressed quickly, making it essential to explore your options and take well-informed action.

Our FREE Liquidation guide provides clear, expert advice on: 

  • Key warning signs that your business may be in danger of possible liquidation.
  • Which insolvency options are available and which ones best suit your situation. 
  • What the liquidation process looks like 
  • Things you should be aware of  throughout the process. 
  • What life after liquidation looks like. 

If you’re considering liquidation or seeking more information, download our comprehensive Liquidation Guide and explore everything you will need to know. 

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How to Stop or Defend a Winding Up Petition in the UK

Being served with a winding-up petition is a serious issue that requires immediate action. Without proper intervention, it could result in the compulsory liquidation of your business. However, there are several strategies available to stop the process, ranging from upfront payment, disputing the debt, or restructuring your business.

Every situation is unique, and the right approach depends on your financial position, the nature of your debt, and your relationship with creditors. Here are some of the most effective options for stopping a winding-up petition: 

Pay the Debt in Full

By far the fastest way to stop a winding-up petition is to repay the debt in full, including any associated legal fees incurred by the creditor as part of the winding-up petition process. Once this has been settled, the creditor can withdraw the petition without a need for the court hearing. 

However, it’s not guaranteed that paying the amount owed will lead to the winding up petition being dismissed. Once the petition has been issued, other creditors may also intervene in order to claim what they feel is owed to them. This process is known as a ‘change of carriage’, and it allows different creditors to take over the petition, despite the original issue having been resolved. A change of carriage can be a serious issue for directors, as it forces the business to address multiple debts simultaneously, having a serious impact on company cash flow. 

To minimise the chances of further claims compounding the one you’re dealing with, it is recommended to seek expert advice prior to proceeding with payment.

Communicate with Creditors

If you find yourself unable to pay the debt back in full, it is possible to negotiate directly with your creditors. If you can demonstrate a genuine intention to repay the debt, you could secure some additional time to reorganise your finances and make repayment more viable.

While informal agreements can work in some cases, creditors are often reluctant to accept them after filing for a winding-up petition. This is because, in order to submit a winding-up petition, they will have already invested significant time and resources towards pursuing legal action and alternative repayment methods — leaving them unwilling to deviate from the formal process. 

If direct communication is unsuccessful, exploring formal alternatives like a payment plan or a business restructuring may be more effective.

Negotiate a Payment Plan (Company Voluntary Arrangement)

A formal alternative to an informal agreement is negotiating a payment plan with your creditors via a Company Voluntary Arrangement (CVA). A CVA allows a company to restructure its debt repayment into much more manageable instalments across an extended period. This enables the business to continue trading while also being able to settle debts over time.

Some of the key benefits of a CVA include: 

  • Immediate protection from legal action, including a winding-up petition. 
  • The ability to spread repayments over several months, or even years. 
  • Company directors can retain control. 

To initiate a CVA, you’ll need the approval of your creditors and the assistance of a licensed insolvency practitioner to develop a proposal. A well-structured CVA can provide breathing room to stabilise your business and protect its future.

Restructure Your Business

If a CVA isn’t viable, a restructuring of your business may be the solution. One common restructuring approach in the aftermath of being handed a winding-up petition is to enter administration, which involves the appointment of an official administrator to take temporary control of the business.

The role of an administrator involves the following: 

  • Reviewing your company’s financial situation 
  • Developing a viable strategy to repay creditors 
  • Ensuring the long-term viability of the business wherever possible. 

Administration provides legal protection against the action of creditors, including winding-up petitions, while the restructuring process is being conducted. However, it’s important to note that the primary objective of the administrator is to facilitate repayment to creditors. This will mean that their focus will be on debt repayment over protecting the company’s interests. 

Dispute the Winding-Up Petition

If you believe that the winding-up petition may have been filed unjustly, disputing the claim could stop the process entirely. Common grounds for a dispute, resulting in having your winding up petition dismissed include: 

  • Exaggerated Figures: The amount claimed in the demand is higher than the actual debt owed. 
  • Disputed Debt: You disagree with the creditor’s claim on the debt. 
  • Lack of Proper Notice: You were not given sufficient warning before the petition was issued. 
  • Failure to Follow Procedure: The creditor did not strictly adhere to legal requirements when they were filing the petition. 

In order to get a winding up petition dismissed, you’ll need to apply to the court for an injunction. This will pause proceedings, giving you more time to gather and present evidence to resolve this issue. 

It’s important to remember that successfully disputing a petition requires strong evidence and should only be pursued with guidance from a trusted professional. 

Seek Professional Help

Stopping a winding-up petition is a complex process, where even simple mistakes can lead to further financial and legal issues. By working with experienced insolvency professionals, you can:

  • Assess your options, allowing you to select the best course of actions for your situation. 
  • Properly negotiate with creditors to stop the petition. 
  • File a CVA or restructure your business in the most effective manner possible

At Inquesta, we specialise in supporting business, helping them navigate the many challenges that come with getting their winding-up petition dismissed. Our team will work closely with you to develop a tailored strategy, ensuring your company has the best possible chance of survival.

Why Seek Professional Help With a Winding Up Petition?

Getting your winding up petition dismissed, or handling it another way, on your own can be highly complex and stressful. A professional insolvency expert will: 

  • Assess your financial situation and explore your rescue options 
  • Negotiate with creditors in order to resolve disputes 
  • Represent you in court in order to find a positive resolution 

Inquesta offers tailored advice to businesses across the UK, ensuring they’re fully equipped to manage such a critical challenge. We’ve helped countless business directors, helping them to navigate winding-up petitions, offering solutions tailored to their exact needs.

From disputing claims to negotiating with creditors, and ultimately getting the winding up petition dismissed, we’re here to help protect your business.

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Meet the Director

We’ve assembled an expert team that has decades of experience with supporting company directors getting a winding up petition dismissed.

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Steven Wiseglass

Director of Insolvency

A co-founder of Inquesta, Steven is a licensed Insolvency Practitioner with over a decade of experience in the field. He is a member of the Insolvency Practitioners Association, Association of Business Recovery Professionals (R3), and his insolvency licence is issued by the Insolvency Practitioners Association. In addition, he sits on the R3 committee of the North West Regional Committee.

Steven specialises in advising directors of small to medium-sized businesses, and has a wealth of expertise in providing the most appropriate advice whatever the firm’s circumstances may be. He has also been instrumental in helping company directors save their business and rebuild them into successful enterprises.

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FAQs

A creditor is able to apply to the court to ‘wind up’ a company that is not able to repay its debt. The application is referred to as a winding up petition. For it to go through, the creditor must be able to unequivocally prove that they are owed £750 or more and that the debtor is unable to pay.

A winding up petition can be issued by any creditor that is owed money. It is also possible for multiple creditors to petition for a winding up petition against one individual/business if they can prove that they all have an equally valid claim for repayment.

If an indebted business is able to pay off what it owes, a winding up petition can be withdrawn by the creditor. Withdrawal prevents another creditor from taking over the petition and further safeguards the future of the debtor’s business.

To withdraw a winding up petition there are a few steps you must undergo:

  • Official written permission from the creditor must be received.
  • An application must be made to the court for the withdrawal of the petition. The application can be no later than five days before the petition hearing, and the petition cannot have been advertised.
  • Once the withdrawal of the petition has been approved, you must send an official letter to the court to signify this withdrawal. A copy of the letter must also be sent to all relevant parties.

A winding up petition must be issued at the registered office of the debtor and given to the company director or a confirmed employee. If nobody can/will accept the petition, it can be served by depositing it at the location (on the reception desk, in a letterbox etc.), or issued to the company director at another location.

A winding up petition can be disputed and dismissed by the court if the judge views the debtor as being able to repay their debt via a CVA or an informal agreement with the creditor. It is also possible to dispute a winding up petition for other reasons, such as:

  • Incorrect attribution of debt
  • Exaggerated figures
  • Petition process followed incorrectly

Being issued a winding up petition is one of the most serious threats you and your business could possibly face. It is the first warning sign that your company could be in major financial difficulty. If you do not adhere to the petition, and what the court demands, your firm could be liquidated.

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