Enforcing a debt by a winding up petition

If you are owed money by a debtor, it can be very frustrating if you do not receive payment in full on time. This is especially so if you have obtained a court order against them for the money you are owed, but your requests for payment are being ignored. When you have tried all other routes to obtain payment, one method of enforcement against a business is to apply to have that company wound up by the court. 

Issuing a winding up petition against a company that owes you money is often a very powerful tool to get the attention of your debtor, and may ultimately be the only way of getting any return from them. A company facing a winding up petition in court will be forced to come to some arrangement to pay, or it can very quickly lead to the end of their company. 

In this blog, we look at when a winding up petition against a company is appropriate, what the potential outcome might be for your own company and the debtor company, how you can bring a winding up petition, and the potential costs of this.   

What is winding up, and what happens to a company when it is wound up? 

If you are owed money from a company then, as a creditor, you may be entitled to bring a winding up petition against your debtor. When a company is wound up, it means the company is put into liquidation and it immediately ceases to trade from that point. This is a court-based action and if the court decides to make the winding up order against a company, they will appoint an Official Receiver over the company.  That Official Receiver will collect in the company’s assets, and pay the company’s creditors from those assets in due course, before dissolving the company. The existing directors and shareholders will have no control from the date of liquidation. 

What will you get out of winding up a debtor company? 

If you are owed money by that company, then you will be an unsecured creditor in the liquidation. This means that once the company is liquidated, you will rank alongside all other unsecured creditors in the priority order of payment. Unsecured creditors rank behind any secured creditors of the company (such as a fixed charge holder), and preferential creditors (some HMRC debt, and some employee debt). Therefore, what you will ultimately be paid against your debt from the company will depend on how much money there is left to pay everyone once all expenses and costs have been paid, along with all secured and preferential creditors.  

Quite often this means that you may be paid a certain number of pence in the pound, if the company does not have enough in the way of assets to pay everyone. Shareholders are last in the priority order, so very often they will receive no return at all in an insolvent liquidation.  

For the reasons above, what you will get back therefore will depend on the financial position of the company when it is liquidated. If there are very few assets and lots of creditors, you may get very little. Conversely, if there are considerable assets, you may make a good recovery.  

If you were the creditor that put this company into liquidation in court, the costs of doing so will come back to you first as a priority over all other creditors. However, you do not get any better ranking regarding payment of your main debt just because you were the petitioning creditor. 

In every insolvent liquidation, the company and its directors will be subject to investigation by the liquidator, and often also the Insolvency Service. Therefore, if you think the directors have been up to no good, then winding up is a good way of ensuring misconduct is investigated. For example, if you think assets have been moved out of the company, or that the directors were paying themselves dividends while not paying you, this can all be investigated and rectified. It is also possible this will lead to a disqualification order against one, or all, of the directors. 

How do you wind up a business, and how much does this cost? 

You must have an undisputed debt of at least £750 to wind up a company.  If any part of the debt is disputed, this should not form part of your winding up petition. Only the undisputed part of the debt may be used, as long as it is over £750.  

The winding up court does not decide disputes, it will only decide if a company is insolvent and unable to pay its debts, and should therefore be wound up. If there is a reasonable dispute, it will give directions for the dispute to go to an alternate court to be adjudicated on first. 

It is therefore preferable to obtain a judgment against a company first if you can. However, to avoid the costs of that, you should be clear that you are able to provide evidence that you have demanded payment and this has not been forthcoming, and no dispute has been raised. 

You can recover your costs when the company goes into liquidation as a priority expense claim, as long as there is sufficient money. There is a court fee to pay, which as of April 2026 is approximately £343. You will also be required to pay the Official Receiver’s deposit, which as of April 2026 is £1,500. Add to this your legal costs, and there are some advertising and search fees that you will need to pay. 

However, such an initial outlay can be very beneficial, and can mean the difference between an outstanding debt being repaid or not.  

A winding up petition is a very draconian remedy against a company. Even if that company eventually fights the petition and an order is not made, the fact that a petition is issued in court will immediately create pressure on a trading company.   

Once seven days have passed from the date of issue of the petition, you are entitled to advertise the petition in the London Gazette. From that date, the company’s bank is very likely to freeze their bank account until the outcome of the winding up petition hearing and, of course, anyone dealing with that business will become aware of the petition. 

Therefore, a company issued with a petition will have very little time in which to act before it has a significant effect on their business. A company who has been ignoring you can no longer do so. For this reason, a winding up petition for a legitimate undisputed debt is often the trigger for quick payment. 

Is a statutory demand required first? 

A statutory demand is not required first if the debtor is a company. This is only a legal requirement for an individual. However, in order to successfully wind up a company, you must prove that it is insolvent. This can be proven by making a demand for money owed to you, and by showing that this is not disputed or not paid within a 21 day period. 

It is therefore advisable to use a statutory demand to clearly set out the debt you are owed, and to give a final 21 day period to pay in full before you issue a winding up petition. This has the dual effect of providing good proof of non-payment, as well as focusing the mind of your debtor to move fast to pay you what is owed to avoid a winding up petition being brought, with all the ramifications this has for them. 

How we can help 

A winding up petition can be a very effective way of recovering a debt owing to you, because of the serious repercussions this has for a company. If you think a winding up petition could help you to recover a debt owed, it is important the correct process is followed to facilitate the repayment of your debt as swiftly as possible. Our specialist solicitors will work with you to ensure this process is quick and efficient for you. 

For further information and assistance, please contact a legal adviser in our Dispute Resolution team in York on 01904 624185.  

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.