Glossary · UK
What is Winding-Up Petition?
A formal court application, usually by a creditor such as HMRC, asking for a company to be compulsorily wound up (liquidated) because it cannot pay a debt, typically issued after a statutory demand has gone unpaid.
Full Definition
A winding-up petition is a formal application made to the court, most commonly by a creditor who is owed money, asking a judge to order that a company be compulsorily wound up, meaning it is placed into liquidation, its assets are sold, and the proceeds distributed to creditors before the company is dissolved. Petitions are usually preceded by a statutory demand -- a formal written request for payment of a debt, typically £750 or more -- which, if left unpaid for 21 days, allows the creditor to petition on the basis that the company is presumed unable to pay its debts. HMRC is one of the most frequent petitioners, commonly pursuing unpaid VAT, PAYE or Corporation Tax. Once a winding-up petition is presented, it is advertised in The Gazette, which can immediately alert the company's bank and other creditors and often triggers the freezing of its bank accounts, even before the petition is heard, making it one of the most disruptive forms of debt enforcement action a company can face. A company facing a genuine, undisputed debt it cannot pay may be able to avoid compulsory liquidation by negotiating a Company Voluntary Arrangement or entering administration (including via a pre-pack sale) before the petition is heard in court, both of which give the company a chance to continue trading or for its business to survive in some form, in contrast to the terminal outcome of a successful winding-up petition.