Compulsory Liquidation
A process led by creditors where the company is placed into Compulsory Liquidation through the granting of a Winding up Order. It is a creditor led process.
The company ceases trading, and assets are liquidated – sold to pay creditors.
This process is usually initiated by a creditor of the company who is owed over £5000 petitioning the Court for a Winding up Order. The Court must be satisfied that the company is insolvent. One way to demonstrate insolvency is for a creditor to issue a statutory demand and the company failing to pay the debt demanded within 21 days. A company, its directors and its shareholders may also petition for the company to be wound up.
Once a Winding up Order is made the Official Receiver automatically becomes the Liquidator.
If the company has assets, the Secretary of State will usually appoint a Liquidator in place of the Official Receiver, or the Official Receiver will convene a creditors’ meeting to appoint a Liquidator. The company’s assets are “liquidated” or turned into cash for distribution to creditors.
Liquidation is the most used procedure for insolvent companies. Liquidation signals the end of a company’s trading. Once the liquidation is concluded the company is dissolved. Most companies that go into insolvent liquidation have already ceased trading, and it’s very unusual for a liquidator to carry on trading in order to sell the business or assets as a going concern.
The appointed liquidator is obliged to carry out a statutory investigation into the affairs of the Company and the conduct of the directors and to report their findings to the Insolvency Service (“IS”). Should the IS consider the conduct of the director to be unfit they may commence director disqualification proceedings.
Next Steps
If you want to find out anything further about this topic then please feel free to call on 0330 236 9930, 0330 236 9938 or 07961 116321. All conversations will be in strict confidence. You can also email vee@navigatebr.com
This article is for information and interest only. It is not a substitute for full professional advice, which will take in to account the specific and individual circumstances. Navigate Business Recovery Limited cannot accept any responsibility for any loss arising as a result of any person or organisation acting or refraining from acting on any information.
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