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Compulsory Liquidation

If your company is insolvent and cannot meet its outstanding debts, you might find that your creditors file a winding-up petition against the company. This is also known as a compulsory liquidation. 

We can offer advice and guidance throughout this process – and if you act quickly we could stop it completely. 

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What’s a compulsory liquidation?

A compulsory liquidation is a way for a third party – usually a creditor – to force the liquidation of a company’s assets to repay money that they are owed. This happens because the company is insolvent – which means it cannot pay back what it owes to its creditors now or in the future. 

A director of a company can petition for it to be placed into compulsory liquidation. This needs to be overseen by a reputable solicitor and can be very expensive. A more cost-effective way of voluntarily liquidating an insolvent company is through a Creditors’ Voluntary Liquidation

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What happens in a compulsory liquidation?

The first action in this type of liquidation is for a winding-up petition to be filed in court by one or more of your creditors. There will then be a court hearing. A judge will hear the petition and make a decision on whether the compulsory liquidation should go ahead. 

We can give you professional guidance from the very beginning of the process. At this hearing you’ll have the opportunity to present your case too, so it’s vital that you also seek the right legal help. 

If the compulsory liquidation is given the go-ahead by the judge, the court will appoint an official receiver. Your creditors will appoint a licensed insolvency practitioner – and it’s at this point where we become your liquidator. In this role, we’ll handle any admin and organise for the sale of the company’s assets. Proceeds will go to the creditors first, with any leftover money going to shareholders and the directors.

What happens after compulsory liquidation?

After your company has been through a compulsory liquidation, it ceases to trade and is removed from the register at Companies House. We’ll take care of this for you by sending a winding-up resolution to Companies House and sending a notification to The Gazette

If you’re being threatened with a liquidation which is not your decision, speak to one of our licensed insolvency practitioners about how we can help. 

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