Compulsory Liquidation / Winding Up
Suitable for: Insolvent companies
Compulsory Liquidation is normally led by a creditor who is pursuing the company for money. The process is initiated by the creditor presenting a winding-up petition. The creditors petition to the court for a company to be liquidated to enable payment to be made from released assets. For the court to consider the creditor’s application for a Winding Up Order, the debt must be over £750 and they must send a 21-day Statutory demand for payment.
Seeking professional advice from a qualified insolvency practitioner is essential because this process is very technical and legally complex. If action is taken quickly, there might be time to follow the procedure of a Creditor’s Voluntary Liquidation even after the winding-up petition has been presented. Normally, this would include paying the costs of the petitioning creditor and informing them that the company will go into Creditor’s Voluntary Liquidation.
However, a Creditor’s Voluntary Liquidation is not always possible. In these circumstances, the court will make a winding-up order and the company will be put into liquidation. Consequently, the bank account will be frozen and the Official Receiver will be appointed as liquidator.
The duty of the Official Receiver is to recover assets for the benefit of creditors and to investigate the circumstances leading to the liquidation. The Official Receiver will send a confidential report on the director’s conduct to the Company Directors Disqualification Unit. The director(s) risk being banned from acting as a director for up to 14 years. This legal process ends with the company’s removal from the Companies House register, which means it ceases to exist.
– This should prevent your debts from getting worse
– The creditor incurs the cost rather than the director(s)
– Trading has to cease and all accounts are frozen
– The director(s) loses all control of the company and their conduct will be investigated
– There is little opportunity for creditors to recover their debt
– The process can be long and is court-dependent