What is a winding-up petition?

Section 124 IA 1986 identifies the parties with standing to petition:

• ›Creditors with debts above the statutory threshold (currently £750 — though most petitions involve substantially more).
• ›The company itself (members’ petition — rare; used for solvent winding-up).
• ›Directors (rare in practice).
• ›The Secretary of State (typically through the Insolvency Service on public interest grounds).
• ›Contributories (members in their capacity as members).

In practice, the overwhelming majority of petitions are creditor-led. HMRC is the largest single petitioner, but many trade creditors and lenders use the petition route. For the HMRC-specific procedure, see HMRC winding-up petition — what to do.

Seven grounds in section 122(1), but in practice one dominates:

• ›Section 122(1)(f) — the company is unable to pay its debts. ~95% of petitions.
• ›Other grounds (rarely used) — just and equitable winding up (s.122(1)(g)); special resolution by company (s.122(1)(a)); failure to commence business (s.122(1)(c)); etc.

Section 123 IA 1986 defines ‘inability to pay debts’ through five sub-tests. The principal three:

• ›Section 123(1)(a) — statutory demand for £750+ unpaid for 21 days (the statutory demand creates presumed insolvency).
• ›Section 123(1)(e) — the company cannot pay its debts as they fall due (cashflow test).
• ›Section 123(2) — the company’s liabilities exceed its assets (balance sheet test).

For the underlying solvency tests, see Insolvency tests — cashflow and balance sheet.

• ›Statutory demand served (where used) — 21 days to comply.
• ›If unpaid — petition presented at the Court (£1,000+ filing fee plus solicitor costs).
• ›Petition served on the company — typically at the registered office.
• ›7 days from service — advertising in the London Gazette (the key procedural threshold).
• ›5–7 weeks from presentation — first court hearing.
• ›At hearing — petition granted (winding-up order made), adjourned (often for further negotiation), or dismissed.

Once a winding-up order is made, the Official Receiver is appointed as initial liquidator and the company’s existence as a trading entity ends.

When the petition is advertised in the Gazette, three immediate consequences:

• ›Bank accounts frozen — banks see the Gazette notice and freeze the accounts to protect themselves under section 127 IA 1986.
• ›Section 127 effect — any company transaction after petition presentation is voidable unless the Court validates it.
• ›Public knowledge — suppliers, customers, employees and counterparties become aware. The company’s commercial position deteriorates rapidly.

Pay the petition debt

If funds are available, paying the petitioner the full debt plus their costs terminates the petition. The petitioner agrees to withdraw — the petition is dismissed. Most useful where the petition is the consequence of a temporary cashflow issue rather than substantive insolvency. Typical cost: petition amount + £1,000–£3,000 petitioner costs.

Initiate voluntary procedure (CVL or administration)

Initiating a voluntary procedure before the petition is granted typically results in petition dismissal. The voluntary procedure produces a more director-friendly outcome than compulsory liquidation — particularly for cooperation with the office holder, the investigation framework, and the ability to influence the liquidator selection. See CVL pillar and Administration vs CVL.

Contest the petition

If the company has a substantive defence (debt disputed, settled, or otherwise not validly owed), the petition can be contested. The Court hears the substantive dispute. Contested petitions are expensive (typically £10,000+ in legal costs) and rarely succeed if the underlying debt is real — they’re worthwhile only where the dispute has merit.

• ›Do not transfer assets out of the company — section 127 makes the transfer voidable, and the liquidator will unwind it.
• ›Do not pay favoured creditors ahead of others — this is a preference under section 239 IA 1986.
• ›Do not ignore the petition — it will not go away. Inaction results in compulsory liquidation.

Petition timelines are short. The 7-day window between service and advertising is the critical period. Initial advice from a Licensed Insolvency Practitioner is free and typically same-day. Book at Contact or call 020 8153 1270 — we routinely deal with petition cases on urgent timescales.

For HMRC-specific petitions, see HMRC winding-up petition — what to do. For the CVL procedure that may be the protective response, see CVL pillar. For administration as an alternative procedure, see Administration vs CVL.