Yes, you can trade after a winding-up petition has been presented against your company, but only carefully and within strict limits set out in the Insolvency Act 1986. The moment a petition is issued, any transactions you make can later be undone by the court unless you take the right steps to protect them.
Most directors do not stop trading the day a petition lands. Orders still need fulfilling, staff still need paying, and suppliers still expect deliveries. The question is not whether the business can carry on physically, but whether doing so is safe for you as a director.
This guide explains what is allowed, what happens to your bank account, the personal risks of trading wrongly, and how a court order can let you keep operating lawfully.
Can you trade after a winding-up petition is presented?
A winding-up petition does not automatically close a company down. Presentation of the petition simply starts a court process that can end in compulsory liquidation, usually several weeks later at the first hearing. Between presentation and that hearing, the company remains a legal entity and can, in principle, continue operating.
The complication is section 127 of the Insolvency Act 1986. It states that once a petition has been presented, any "disposition" of company property — including payments out of the bank account, new contracts, or asset sales — is void if a winding-up order is later made, unless the court approves it in advance. In effect, the law lets you keep the doors open, but it can unwind what you do while you were open.
This is why most guidance on trading during a petition focuses on protecting individual transactions, not on whether the company can trade at all.
The impact of the account freeze on day-to-day trade
In practice, the biggest obstacle to trading is not the law itself but your bank. Once a bank becomes aware that a winding-up petition has been presented against a customer, it will typically freeze the account to protect itself from the void-disposition risk under section 127.
A frozen account can quickly stall day-to-day trade:
- Outgoing payments to suppliers, HMRC or staff may be blocked.
- Incoming customer payments can still arrive but may not be released.
- Direct debits and standing orders can bounce, affecting payroll and rent.
- Card terminals and online payment providers may also pause facilities.
Banks usually find out through their own monitoring, through notices published in The Gazette, or from a search by the company itself or a third party. Advertisement of the petition in The Gazette is often the trigger point, which is one reason our article on what happens after a winding-up petition is worth reading alongside this one.
Personal risks if you keep trading wrongly
Trading after a petition is presented is not simply a company problem — it can become a personal one for directors. If a winding-up order is made and the liquidator later finds that payments or contracts were entered into without protection, several consequences can follow.
- Void transactions: any unprotected payment or disposal can be reversed, meaning the person who received it may have to repay the liquidator.
- Personal liability: directors can be asked to personally account for value lost from the company through unprotected trading.
- Wrongful or fraudulent trading claims: if trading continued with no reasonable prospect of avoiding insolvent liquidation, or with intent to defraud creditors, directors can face personal liability under the Insolvency Act 1986.
- Director disqualification: conduct during this period can be examined if the company later enters liquidation.
None of this means directors must stop the moment a petition is served. It means every material transaction from that point needs to be made with the risk understood, and ideally with proper protection in place. Directors' wider duties during this period are covered in our article on director duties after a winding-up petition.
How a validation order enables lawful trading
The main legal safeguard is a validation order — a court order under section 127 that formally approves specific transactions, or a category of transactions, so they cannot later be voided if the company is wound up.
A validation order is typically sought by the company (or sometimes a bank or supplier) where trading needs to continue for a genuine business reason, such as fulfilling existing contracts or preserving the value of the business. The application is made to the court hearing the winding-up petition, usually with evidence showing:
- The transactions are in the ordinary course of business.
- They are made in good faith, at a fair value.
- Continuing to trade benefits creditors as a whole, rather than favouring one over another.
If granted, a validation order can cover a bank account generally, allowing day-to-day payments to flow again, or it can be limited to specific payments such as wages or a key supplier. Because these applications involve court procedure and evidence, they are normally handled by a solicitor or insolvency practitioner rather than the director alone — this is exactly the kind of situation where an introduction to a regulated specialist is useful. Related questions about paying people during this period are addressed in our guide on paying wages and suppliers during a winding-up petition.
When continuing to trade becomes dangerous
Trading can continue lawfully while a validation order is in place, or while transactions are genuinely low-risk and clearly benefit creditors. It becomes dangerous when any of the following apply.
- There is no realistic prospect of the petition being dismissed, adjourned or paid off before the hearing.
- New credit, stock or deposits are being taken from customers who are unlikely to receive goods or refunds.
- Payments are being made that prefer one creditor (such as a director's own loan) over others.
- The company is insolvent on a cash-flow or balance-sheet basis with no plan to recover.
- No advice has been sought and no validation order has been applied for, despite the account being frozen.
At this stage, the safer course is usually to stop taking on new commitments, protect what you can, and speak to a regulated insolvency practitioner or solicitor about the options available, including whether the petition itself can be challenged, adjourned or resolved.
Frequently asked questions
Can I take new orders after a winding-up petition has been presented?
You can, but each new order creates a transaction that could later be examined. If the company has no realistic prospect of delivering, or is taking deposits it cannot fulfil, this is high risk.
Can I still bank payments from customers during a winding-up petition?
Money coming in is usually accepted by the bank, but access to it may be restricted until the account is unfrozen or a validation order is obtained. Customers paying in does not itself breach section 127; the risk sits with payments going out.
Do I need a validation order for every payment?
Not necessarily. Genuine, ordinary-course payments that clearly benefit creditors carry lower risk, but there is no guarantee a court will agree after the event. A validation order removes that uncertainty for the payments it covers.
When should I stop trading after a winding-up petition?
Stop taking on new risk — new stock, new customer money, new credit — once it is clear the petition is unlikely to be resolved before the hearing, or once you cannot honour existing commitments.
What happens if I keep trading without protection and the company is wound up?
A liquidator can ask the court to declare unprotected transactions void, and can pursue directors personally for value lost to the company. This is the core risk a validation order is designed to manage.
This article is general information, not legal, financial or insolvency advice, and does not cover every circumstance. Every company's position is different, so directors should speak to a regulated specialist about theirs.
If you would like to talk through your options, Harbourfirst can introduce you to a regulated insolvency practitioner or solicitor — start an enquiry.