winding up petition

A winding up petition (WUP) is the most serious legal action taken by a creditor to recover the debt owed to them. It must be acted upon or else the petition may disable a company’s ability to trade, ultimately spelling the end for a business. Once a WUP is served, a business has seven days to act before its financial situation is made public. A court hearing decides whether or not to grant a winding up order. If granted, insolvency is declared and the process of liquidation begins whereby the company ceases trading and its assets are sold to repay the creditor. Its only purpose while winding up is to sell off its assets and stock to repay creditors in full, and if there are any remaining assets, to distribute those among partners and shareholders. However, receiving a WUP doesn’t always mean that a company has to dissolve. With effective legal advice and immediate financial changes made to the business, insolvency and liquidation can sometimes be avoided.