A winding up petition is an application to the English court to force an English company into liquidation (close it down) because it can't pay its debts. It's the most extreme action a creditor can take against a company, and the threat alone often prompts payment.
What does winding up mean?
When a company is "wound up," it's closed down permanently:
- A liquidator is appointed to sell all assets
- Employees are made redundant
- Creditors are paid from the proceeds of the realisation of any assets (in priority order)
- The company is dissolved (ceases to exist)
This is different from administration, where the aim is usually to rescue the business.
When can you issue a winding up petition?
You can petition to wind up a company if:
- The company owes you at least £750 (the current minimum)
- The debt is undisputed (they don't have a valid reason to contest it)
- The debt is due and payable (not a future debt)
- The company has failed to pay after proper demand
Important: You cannot use a winding up petition for disputed debts. If the company genuinely disputes owing the money, the petition will be dismissed and you may have to pay their costs. You will then have to go off and begin proceedings in the small claims court if you still want to pursue the debt.
The process
Step 1: Statutory demand (optional but strongly recommended)
Serve a statutory demand (form SD1 or SD2) giving the company 21 days to pay. If they don't:
- This proves they can't pay their debts
- Strengthens your petition
Step 2: Issue the petition
File the winding up petition with the court.
Costs:
- Court fee: £343
- Deposit: £2,600
- Total: ~£2,943 upfront
It is sometimes possible to get these fees back if the company can afford to repay them, but this is rare.
Step 3: Serve the petition
The petition must be properly served on the company at their registered office. There are strict rules around this.
Step 4: Advertise the petition
You must advertise in the Gazette at least 7 business days before the hearing. This makes the petition public.
Warning: Once advertised, the company's bank will likely freeze their account. This can destroy the business even if the petition fails.
You also need to send a copy of the advert and various forms to the Court at least five working days before the Court hearing.
Step 5: Court hearing
The court decides whether to:
- Make a winding up order (company is wound up)
- Dismiss the petition (debt is disputed or paid)
- Adjourn (give more time)
Step 6: Liquidation
If a winding up order is made:
- Official Receiver takes control (and liquidators might be appointed)
- Assets are sold
- Creditors are paid from proceeds
- Company is dissolved
How much will you actually recover?
In most compulsory liquidations, unsecured creditors receive little or nothing:
Payment priority:
- Secured creditors (banks with charges over assets)
- Costs of liquidation
- Employee wages and holiday pay
- HMRC for certain taxes
- Unsecured creditors (usually you)
- Shareholders (almost never anything left)
By the time a company is being wound up, there's often nothing left for unsecured creditors.
When is a winding up petition worth it?
Good situations:
- The company has assets but is refusing to pay
- You want to force them to take you seriously
- The threat will prompt payment
- You're owed a large amount
But bear in mind that the Court does not like winding up petitions used to enforce debts.
Bad situations:
- The company genuinely has little or no money
- The debt is disputed
- You just want to be paid (small claims is usually better)
- You can't afford the upfront costs
The threat is often enough
Many creditors issue a statutory demand but never file the actual petition because:
- The company pays to avoid liquidation
- Directors personally guarantee payment
- A payment plan is agreed
The threat of winding up is seen by some as a powerful negotiating tool.
Risks to consider
Costs if it fails: If the petition is dismissed (debt is disputed, wrong procedure, etc.), you may pay the company's legal costs.
You might get nothing: Even if the company is wound up, unsecured creditors often receive 0-10p in the pound.
Upfront costs: £2,900+ is required upfront, which you may not recover.
Nuclear option: This destroys the company. If you wanted an ongoing relationship or there's a chance they'll recover and pay, this ends that possibility.
Alternatives to winding up
| Alternative | Better when... |
|---|---|
| Small claims court | Debt under £10,000, want CCJ |
| Statutory demand only | Threat alone might work |
| High Court Enforcement | CCJ exists, company has assets |
| Negotiate payment plan | Company can pay over time |
Winding up petition vs statutory demand
| Statutory Demand | Winding Up Petition | |
|---|---|---|
| Cost | Low (serving costs only) | High (~£2,900+) |
| Public | No | Yes (advertised in Gazette) |
| Effect on company | Pressure | Devastating |
| Risk if disputed | Low | High (costs awarded against you) |
| What it leads to | Petition or payment | Liquidation or payment |
How Garfield helps
For most small business debts, Garfield's automated debt recovery through small claims court is more appropriate than a winding up petition:
- Lower risk
- Lower cost
- More likely to result in actual payment
- Suitable for debts under £10,000
We help you get a CCJ and then you can enforce it through methods like High Court Enforcement, which often recovers money without destroying the business.
Winding up petitions are a specialist area. If you're considering one, it's worth getting legal advice on whether it's the right approach.