To Wind Up, or Not to Wind Up – That is the Question

For creditors chasing unpaid debts, the winding up petition can feel like the big red button—powerful, final, and slightly intimidating. On one hand, it threatens serious consequences for a debtor company. On the other, it comes with upfront costs, no guarantee of repayment, and complex legal steps. So when should you consider using this legal tool over a more traditional County Court Claim?

In this post, we’ll break down what winding up a company really involves, the pros and cons, and how to decide whether it’s the right move for you.

1. First Things First: Is a Winding Up Petition Even an Option?

Before going ahead, you need to consider a few legal prerequisites.

• Minimum Debt Threshold: You must be owed at least £750.00 to issue a winding up petition. This figure applies if you’re proceeding based on an unsatisfied statutory demand or other evidence of the company’s inability to pay, such as no response to a winder letter.
• Undisputed Debts Only: This is arguably the most critical point. The debt must be undisputed. If the debtor turns up to the hearing and disputes the debt—even if their grounds are questionable—the court is likely to dismiss the petition and there could be a cost order awarded to you. The Insolvency Court will not deal with any dispute. This could leave you out of pocket for your legal costs with nothing to show for it.

Tip: If your debt might be contested, consider the County Court route instead to obtain a judgment first.

2. What Does It Cost to Wind Up a Company?

Though the threshold is low, the cost isn’t.

Bringing a company to the brink of insolvency through a winding up petition typically costs upwards of £4,000. This includes:

• Court fee
• Solicitor fees
• Process serving
• Advertisement in the London Gazette (a legal requirement)
• Counsel fees

The costs associated with the winding up process are recoverable, and in any negotiations with the debtor we would seek all costs associated with the petition alongside the balance before withdrawing the petition. Therefore you can technically pursue small debts this way, but it might not be cost-effective unless the sum is substantial, or you suspect the company has assets that will be liquidated.

Furthermore, even if the company is successfully wound up, there’s no guarantee you’ll get your money back. The Official Receiver (OR) gets paid first by you as the Petitioner. Then, if there’s any money left, it’ll go towards their costs and reimbursing your costs for the proceedings first and then paying any debts owed. All unsecured creditors are treated the same and the liquidator will work out the value of debt against the value of assets. This will allow them to calculate the dividend payment based on the debt values. This is normally a penny in the pound calculation. Creditors are then paid this dividend against the debt claimed to allow an equal distribution to all unsecured creditors. If no assets are recovered? You’re at a loss.

3. The Winding Up Process – Step by Step

The process is not a simple one-off filing. It includes:

1. Drafting and filing the petition with the court
2. Serving the petition on the company at its registered address
3. Advertising the petition in the London Gazette (at least 7 days before the hearing)
4. Court hearing to decide the company’s fate

At every stage, new costs are incurred and interest on the debt continues to accrue.

At any time before the final hearing, the debtor can make payment or an offer—this often happens when the company realises the seriousness of the action. However, this also means adjusting your figures constantly and ensuring everything is documented and up to date.

It is important to be aware that from the date the petition is sealed, any payments are subject to the insolvency and can be clawed back by the insolvency practioner upon the winding up order being made.  

4. What Does it Mean to “support” a Petition?

You may have heard the term but not fully understood it. Supporting a petition can happen in two key ways:

• As the petitioner (primary creditor): Once your winding-up petition is sealed by the court, other creditors may see it and choose to support it. This means they confirm they’re also owed money by the company and want to be involved in the proceedings. Their support matters: you can’t simply withdraw your petition after being paid unless all supporting creditors also agree to withdraw. So, if others support your petition, you’ll need to negotiate for payment of all balances—not just your own.
• As a supporting creditor: If you discover a petition already exists against a company you’re pursuing, you can support it instead of starting your own. Doing so helps protect your interests and ensures your debt is included in any settlement discussions.

5. Why Use a Winding Up Petition Instead of a County Court Claim?

Good question. A winding up petition is not just a collection tool—it’s a powerful threat and need to have the intention to go ahead.

• Pressure Tactic: A County Court Claim results in a judgment on a company’s credit file. But many companies can continue trading despite CCJs. Enforcement (e.g., bailiffs or charging orders) is often needed—and only works if you know where the company has assets. By becoming the primary creditor of a petition, you will become the number one creditor to clear if the debtor has multiple creditors. Your petition is a much bigger threat than any CCJ they may be looking to pay off and therefore you should become the debtor’s priority.
• Winding Up Hits Harder: A petition is public, and being advertised in the Gazette often affects the company’s reputation, credit, and banking facilities. Banks will freeze accounts once a petition is advertised, and they are made aware of it. That pressure can force a company to pay up quickly—if they want to prevent ending the company.
• Fraud or Misconduct?: If the company is wound up, the Official Receiver conducts a full investigation. This includes reviewing the directors’ conduct. If you suspect mismanagement, fraudulent trading, or siphoning of funds, this can be a route to bring those actions to light. Directors found at fault can be banned, fined, or even prosecuted.

Final Thoughts: Should You Wind Up?

Winding up petitions are a double-edged sword. Used appropriately, they can be an incredibly effective way to recover money and hold mismanaged companies accountable. But they also carry financial risk and procedural complexity.

You should consider a winding up petition if:

• The debt is significant and undisputed
• The company appears to be trading but ignoring all payment requests
• Other enforcement routes have failed or are unlikely to work
• You suspect wrongdoing and want the company investigated

Avoid winding up petitions if:

• The debt is disputed or unclear
• The company has no assets and is unlikely to recover funds
• You’re unable or unwilling to risk thousands in legal costs

Need Help?

If you’re unsure whether to go down this road, it’s always best to get legal advice. We have a team that are experienced in insolvency proceedings. Contact our Top Tier Legal 500 Debt Recovery team who will be able to assist you.