A winding-up petition has been served: the first seven days

The petition is the most serious letter a company receives, and the week after it lands is mostly about protecting the things that keep trading possible: the bank account, the supply chain, and the contracts that treat insolvency as a trigger.

Problems, in order · Part of Outsourced General Counsel

A winding-up petition is not a demand letter with harsher wording. It is a court process asking for your company to be closed and its assets distributed, and once it has been presented the timetable stops being yours.

Most of the damage in the first week is not done by the court. It is done by a bank freezing an account, a supplier acting on a clause nobody had read, and an ordinary payment made in good faith that later has to be undone.

The work divides into four questions: is the debt real, what happens to the money, what do your contracts already say, and who needs to know. Take them in that order.

Is the debt genuinely disputed?

Everything else follows from this one.

A petition is the wrong instrument for a disputed debt. Where a sum is genuinely disputed on substantial grounds, or there is a real cross-claim of equal or greater value, the petition is vulnerable — and the creditor who pressed on regardless can find themselves paying for it. Where the debt is plainly due and simply unpaid, the position is entirely different, and the week is about cash and negotiation rather than argument.

Be honest with yourself here. "Their invoice looks high" is not usually a substantial dispute. "The goods never arrived, we said so in writing at the time, and there is a credit note in the file" is.

Build the file on day one: the contract, the purchase orders, the delivery records, the correspondence, any statutory demand, and the petition itself with its date of presentation. That date matters more than any other in the process.

A statutory demand is often the step before a petition. Where a company owes a creditor more than £750 and a statutory demand has been served and left unsatisfied for three weeks, the company is treated as unable to pay its debts — which is the ground the petition rests on.

The money, and section 127

The provision that catches directors out is section 127 of the Insolvency Act 1986. In a winding up by the court, any disposition of the company's property made after the commencement of the winding up is void unless the court orders otherwise. The winding up is treated as commencing when the petition was presented — not when an order is made weeks later.

Read that again, because it works backwards. Every payment out of the company between presentation and the hearing is potentially void, and if an order is made a liquidator can pursue whoever received the money.

Banks know this. It is why accounts are frozen — not out of malice, but because no bank wants to be the one that made a void disposition.

What that means in week one:

• Assume the account can be frozen at short notice. Plan for it before it happens rather than afterwards.
• Do not move money between group accounts to protect it. That is precisely the behaviour that turns a commercial problem into a personal one.
• If the company has to keep trading — wages, and the supplies that generate next month's receipts — that is what a validation order is for. It is an application to the court to permit specified payments, and it is far easier to obtain in advance than to justify after the fact.

Advertisement is the real deadline

A petition is advertised in The Gazette ahead of the hearing, and the hearing itself typically falls around eight to ten weeks after service. Advertisement is the moment a private problem becomes a public one: banks, credit reference agencies, insurers, and in time your customers.

So the working deadline in the first week is not the hearing date. It is the advertisement. Nearly everything worth doing — paying, settling, agreeing a standstill, or applying to restrain the petition — is worth doing before then.

The clauses that have already fired

This is the part most businesses miss, and the part we would look at first.

Insolvency is a standard contractual trigger, and the trigger is very often the presentation of a petition rather than a winding-up order. Which means the clause has already operated, whether or not anyone has noticed.

Where to look:

• The lease. Forfeiture on insolvency and any right of re-entry. If the premises matter, this is the highest-consequence clause you own.
• Supply contracts. Termination and suspension rights, retention of title over stock sitting in your warehouse, and any switch to payment in advance.
• Customer contracts. Termination rights, and step-in or assignment provisions that let a customer take the work elsewhere.
• Facilities and asset finance. Events of default, cross-default between facilities, and personal guarantees.
• Licences. Software, franchise and brand licences that end on an insolvency event and can stop the business functioning inside a day.
• Insurance. Notification obligations, and whether cover responds at all.

Some termination-on-insolvency clauses in contracts for the supply of goods and services are restricted by the Corporate Insolvency and Governance Act 2020, but the protections are narrower than people assume. Read the actual contract rather than relying on the general position.

What still has to happen

Trading does not stop because a petition has been served. Wages are still due. Deliveries still arrive. Customers still expect what they ordered.

Two things change.

First, the frame for decisions shifts. Once insolvency is a real prospect, the interests of creditors become a live factor in decisions that were previously about shareholders alone. In practice: document decisions properly, and do not pay the creditor who shouts loudest simply because they shout loudest.

Second, ordinary decisions acquire a second question. Does this dispose of company property, and could it be justified later? That is not a reason to stop paying suppliers. It is a reason to know which payments you are making, and why.

Who to tell, and in what order

• Your accountant, immediately — cash position and covenant picture.
• Your bank, before they read it in The Gazette. A managed conversation is better than a frozen account and no explanation.
• Key suppliers, selectively, and only where the contract or the relationship requires it.
• Your board and shareholders, in writing, with the decision record attached.
• Customers, generally not, unless a contract obliges you to notify.

What Dinmore Bell does in that week

We take the file, establish whether the debt is genuinely disputed, and put a position to the petitioning creditor inside the same week. We map every insolvency trigger across the lease, the supply contracts, the customer terms and the facilities, so you know which clauses have already fired and which are about to. We hold the correspondence with the creditor, the bank and the suppliers, so the founder is not running five conversations at once. And where the answer is a court application, we instruct and manage the people who make it.

Where a specialist is needed

Applications to restrain advertisement, to dismiss a petition or to validate payments are court work conducted by solicitors and counsel with rights of audience; Dinmore Bell instructs them, prepares the commercial file underneath and holds the position around them. Where the petitioner is HMRC, chartered tax advisers deal with the computation and any time-to-pay proposal. And where the right answer is a formal process — administration, a company voluntary arrangement, or a solvent wind-down — that is the work of a licensed insolvency practitioner. The earlier one is in the room, the more options are still on the table.

Dinmore Bell provides an outsourced General Counsel function for founder-led businesses, owning work of this kind end to end rather than advising on it and handing it back.