What Is the Impact of a Winding Up Petition?

A winding up petition is one of the most serious legal actions a creditor—most commonly HMRC—can take against a company that owes them money. It is a formal request to the court to close (or “wind up”) the company due to unpaid debts, usually £750 or more.

But what does this actually mean for your business? Here’s a quick breakdown of the key impacts:

Frozen Bank Accounts

Once a winding up petition is advertised in The Gazette (typically 7 days after it’s served), your company’s bank accounts are likely to be frozen. This can instantly paralyze your business, making it impossible to pay staff, suppliers, or operate normally.

Severe Reputational Damage

The petition becomes public knowledge, which can scare off clients, suppliers, and investors. Trade credit may be withdrawn, and your business could lose contracts or face demands for immediate payment from nervous creditors.

Legal Action Escalation

The petition is a clear signal that a creditor is serious about recovering their money. If the debt remains unpaid, the court can issue a winding up order, leading to compulsory liquidation. This means:

• The company ceases to trade
• Assets are sold off to repay debts
• Directors lose control of the company

Personal Risk for Directors

If directors continue trading after the petition is served, they may be held personally liable for debts incurred during this period—especially if they knew the company was insolvent

Limited Time to Act

From the moment a petition is served, time is critical. There are only a few weeks—sometimes less—to:

• Pay the debt
• Dispute the petition (if valid grounds exist)
• Propose a solution like a Company Voluntary Arrangement (CVA) or enter administration to protect the business

Final Thoughts

A winding up petition is a red alert—not just a debt collection method. It can quickly lead to the end of your business if not handled swiftly. If your company receives one, seek immediate professional advice from a licensed insolvency practitioner. Acting early could give you options to rescue the business or mitigate the fallout.

Keywood Group is an independent firm of Licensed Insolvency Practitioners based in Birmingham and London, specialising in providing confidential and expert advice on all aspects of corporate insolvency.