You've received a winding-up petition: the 7-day checklist

A winding-up petition is a creditor asking the court to close your company, and the gap between it being served and it being advertised in the Gazette is the only window in which you can still control the outcome.

What has actually happened

A creditor, very often HMRC, has decided they are not going to get paid by asking. They have issued a petition at court saying the company is unable to pay its debts and asking for it to be wound up. It has been served on the company, usually by hand at the registered office. A hearing date has been set, typically six to ten weeks away.

The hearing is not the deadline. The deadline is the advertisement. The petitioner is required to advertise the petition in the Gazette at least seven working days after service and at least seven working days before the hearing. The day it is advertised, two things happen that you cannot undo: every other creditor sees it and can join in, and the company’s bank sees it and freezes the account. From that point, any payment out of the company’s bank account without a court order can be reversed by a liquidator, so banks stop them all.

That is why the seven days matter. Before the advert, the petition is a private dispute with one creditor and can usually be dealt with. After it, the company is trading with no bank account and a public notice that it is insolvent.

Day one: find out exactly what you have

Read the petition. It will tell you who the petitioner is, how much they say they are owed, the court, the hearing date, and the solicitor acting. Check the amount against your records. Check whether a statutory demand came first (it often does, and often went to a registered office nobody checks).

Work out the advertisement date. Seven working days from service is the earliest the petitioner can advertise. HMRC in particular tends to advertise as soon as it is allowed to.

Then do two things today. Stop any direct debits or standing orders you would not want to bounce. And call a licensed insolvency practitioner, because every option on this list is easier with one involved and most of them need one.

Days two and three: decide which of the four outcomes you are aiming for

There are only four ways a petition ends, and the one you get depends on what you do this week.

1. Pay the debt and the petitioner’s costs. If the money exists, or can be found, this is the fastest route. The petitioner withdraws or the petition is dismissed at the hearing. You will also have to pay their costs. The court fee and the Official Receiver’s deposit alone come to around £3,000, so an HMRC petition typically costs £3,500 to £5,000 to clear on top of the debt. Paying the debt but not the costs does not end it. Paying it after the advert means other creditors who have joined the petition still have to be dealt with.

2. Dispute the debt. If the debt is genuinely disputed on substantial grounds, a petition is the wrong way to collect it and the court can dismiss or restrain it. The dispute has to be real and evidenced, and it has to have been raised before the petition. A dispute invented in week two does not work. If you have a genuine one, a solicitor needs to be instructed now, not after the advert.

3. Put the company into a process of your own. If the company is insolvent and the petition is only the first of what will be several, a creditors’ voluntary liquidation or an administration before the hearing lets you choose the practitioner, control the timing, and deal with all creditors at once. The petitioner’s debt gets treated like everyone else’s. This is the most common outcome for a company that is insolvent and has an overdrawn directors’ loan account or other reasons to prefer a liquidator it has appointed to one the court appoints.

4. Let the company be wound up. The court makes the order, the Official Receiver takes over, and the investigation into the directors starts with no input from you. This is the outcome if you do nothing. It is also, occasionally, the right choice for a company with nothing left to protect, but make it a decision rather than a default.

Days four and five: act on the choice

If you are paying: get the petitioner’s solicitor on the phone, agree the figure including costs, pay it, and get written confirmation that the petition will be withdrawn or will not be opposed being dismissed. Ask them not to advertise while the payment clears.

If you are disputing: your solicitor applies to restrain the advertisement. This has to be in front of the court before the petitioner advertises, so it is the most time-critical of all four.

If you are going into a voluntary process: the practitioner starts the CVL or administration immediately. Where the petition has already been served, the practitioner will usually seek the petitioner’s consent or apply to the court, because the petition affects what can be done without an order. HMRC generally cooperates with a properly run CVL that starts before the hearing.

If you need the company to keep trading through the week, your practitioner or solicitor can apply for a validation order, which lets specified payments go through the frozen account. Courts grant these for genuine trading payments that keep the business alive, not for paying favoured creditors.

Days six and seven: deal with the bank, the staff and the paperwork

Once the route is fixed, the bank conversation becomes manageable. If the petition is being withdrawn, tell them and show them the confirmation. If a CVL is starting, the practitioner handles it. Employees need to be told the truth before they read it in the Gazette. And whatever route you have chosen, gather the company’s records now: bank statements, the aged creditors, the last accounts, the PAYE and VAT position. Every route needs them and the Official Receiver’s route demands them.

What not to do

Do not move money out of the company account to a new account to keep trading. After the petition is presented, any disposition of company property can be void and a liquidator will trace it.

• Do not pay the petitioner’s debt with money that leaves other creditors worse off if the company is going into liquidation anyway. It may be a preference and you will be asked about it.
• Do not ignore the hearing. A winding-up order is made in minutes if nobody attends.
• Do not assume a repayment plan agreed on the phone with HMRC stops the petition. Get it in writing and get confirmation the petition will be withdrawn.

What to do today

1. Read the petition and note the petitioner, the amount, the hearing date and the earliest advert date.
2. Decide which of the four outcomes you are aiming for.
3. Stop direct debits that will bounce and do not move money out.
4. Speak to a licensed insolvency practitioner today. They will tell you which route is realistic for your figures.