If you’ve just been handed a winding–up petition, you have a narrow window of options — and most of them close within the next seven days. This guide is written for directors in the middle of it. If you haven’t read the petition yet, do that first. Then come back here.
What you’ve just been served
A winding–up petition is a court application asking a judge to liquidate your company.
It is the most serious debt–recovery action a creditor can take in England and Wales. The creditor isn’t asking for payment any more. They are asking the court to close the company down.
It can be presented by any creditor owed £750 or more in undisputed debt. In practice the most common petitioners are HMRC, banks and trade suppliers — but a landlord, a former employee or a single customer can issue one too. The £750 figure is statutory. It hasn’t moved since 1986. There is no maximum.
The clock that started today
The moment you were served, three timetables began running.
The takeaway from the timeline: most of what can be done to save the company has to happen in the first seven days.
What not to do in the first 48 hours
Before anything else, do not do the following. Each of them looks reasonable from the inside and makes the position worse from the outside.
- Don’t pay favoured creditors. Settling with your most important supplier or paying off a director loan in the days after the petition is exactly the kind of disposition the court can reverse. It can also expose you personally.
- Don’t take money out of the company account. Salary, dividends, expense reimbursements — anything moving money from the company to anyone, including yourself, sits in dangerous territory once a petition has been presented.
- Don’t transfer assets. Moving vehicles, equipment or contracts to another company you control is the single fastest way to expose yourself to misfeasance proceedings later. Liquidators look for this.
- Don’t ignore the petition. Doing nothing is treated by the court as acceptance. If no defence is filed and no payment is made, the winding–up order is the default outcome at the hearing.
- Don’t acknowledge a debt you dispute. If the petition is based on a debt you genuinely contest on substantial grounds — wrong amount, defective service, counterclaim, work not delivered — saying “we’ll pay it” by email cuts off the strongest defence available to you.
Any disposition of company property made after the petition is presented is potentially void under Section 127 of the Insolvency Act 1986 — meaning a liquidator can reverse it. This applies whether you pay £50 or £50,000. The mechanism, and how to keep trading lawfully once an account is frozen, is covered in our Section 127 guide.
What to do in the first 48 hours
Read the petition carefully. Confirm three things: the petitioner’s name, the debt amount claimed, and the date and court of the hearing. Errors at this level are not unusual and can be fatal to a petition.
Inventory your position honestly. Be clear with yourself about whether the company is genuinely solvent and the debt is disputed, or whether the company can’t pay and this is the consequence. Both situations have routes forward. They are different routes.
Tell your accountant. They will need to know immediately, and may already have records that bear on whether the debt is genuinely owed.
Get specialist insolvency advice. Not your usual commercial solicitor. Winding–up petitions have a procedural rhythm of their own, and the wrong advice in the first seventy–two hours can close doors you’d otherwise have kept open. The relevant expertise is specifically insolvency litigation — and where HMRC is the petitioner, knowing how HMRC actually thinks about settlement matters as much as the legal procedure.
Your options before the hearing
There are six broad routes between service and the hearing date. Most cases use a combination of them.
- Pay the debt in full. If the company has the funds and the debt isn’t disputed, paying is the cleanest route. The petitioner withdraws the petition, the court records it, and the company continues. The catch: if the petition has already been advertised and the bank has frozen the account, paying becomes mechanically difficult — which is one reason the seven–day window matters so much.
- Dispute the debt. If the debt is genuinely contested on substantial grounds, the petition is an abuse of process and the court will dismiss it — usually with costs against the petitioner. “Substantial grounds” is the key phrase. The court won’t try the dispute at the petition hearing; it just needs to see that the dispute is real rather than tactical.
- Apply to restrain advertisement. Where the petition shouldn’t have been issued at all — defective service, disputed debt, procedural error — an urgent court application can prevent the Gazette advertisement and stop the public–trading damage before it starts. This is the most time–sensitive option in the toolkit.
- Negotiate with the petitioner. Most petitions settle. The creditor’s objective is recovery, not closure, and a credible payment proposal often resolves the petition before the hearing. Where HMRC is the petitioner this means a Time to Pay arrangement HMRC will actually accept — which depends on knowing what HMRC look for and what they reject.
- Company Voluntary Arrangement (CVA). A formal agreement with the creditor body to restructure the company’s debts. If accepted, the petition is stayed. CVAs work for companies with a viable underlying business but a debt overhang they cannot pay on the original terms.
- Administration or voluntary liquidation. If the company is not viable and cannot pay, taking control of the process — placing the company into administration or a creditors’ voluntary liquidation rather than letting the petition run to a compulsory winding–up order — is often the better outcome. It is also the route that demonstrates the director acted responsibly, which matters in any later investigation.
When HMRC is the petitioner
HMRC issues more winding–up petitions in the UK than any other creditor. If your petitioner is HMRC, the calculus changes in two specific ways.
HMRC doesn’t have to serve a statutory demand first. Other creditors usually serve a statutory demand and wait twenty–one days. HMRC can move straight to a petition. The petition is often the first formal indication that negotiation has failed.
By the time the petition lands, internal HMRC processes have already escalated past the point where standard payment–plan options apply. A petition isn’t a bluff or a pressure tactic — it’s issued when HMRC’s collection function has concluded that voluntary resolution isn’t going to happen. That doesn’t mean the position can’t be turned around. It does mean the conversation needs to start from a different place.
Having spent eight years working at HMRC and fifteen years as a tax consultant before qualifying as a solicitor, I know how HMRC make those decisions — what factors actually move them, and what doesn’t. That knowledge is the difference between a settlement proposal that gets read and one that gets the petition adjourned.
What happens at the hearing
The first hearing is short — often under twenty minutes — and the court has four options.
It can dismiss the petition, where the debt is paid, genuinely disputed, or the petitioner has erred procedurally. It can adjourn the petition, usually to allow time for payment, evidence, or restructuring. It can record a withdrawal or settlement. Or it can make a winding–up order.
If a winding–up order is made, the company enters compulsory liquidation immediately. Control passes to the Official Receiver. Trading stops. Employees are dismissed. The directors lose authority over the company’s affairs from the moment the order is made.
The Official Receiver also begins investigating the conduct of the directors over the period leading up to the order. That investigation can result in personal liability claims and director disqualification proceedings. Acting responsibly between the petition being served and the hearing is one of the strongest defences against criticism later.
What this means today
You have a window. It is narrower than it feels — most of the meaningful action has to happen in the first seven days — but it exists.
The single most important decision you make this week is who advises you. The petition itself follows a tight legal procedure. The settlement of the petition, especially where HMRC is involved, follows a different logic entirely. Both need to be handled by someone who has done it before.
If you’d like to talk through the position, book a free thirty–minute call. There’s no obligation, and the early conversation often makes the difference.
