What is Compulsory Liquidation?
To place a company into compulsory liquidation, one or more of the company’s creditors must petition to the court. Once in compulsory liquidation, all assets are liquidated into cash and the proceeds are then used to repay outstanding debts the company owes.
A company can only receive a winding up petition from a creditor if they owe more than £750 and have failed to pay. Failure to pay can be either an unpaid County Court Judgement or a formal demand which is still outstanding.
The conclusion of compulsory liquidation is the dissolution of the business. The company will cease to exist and will be struck off Companies House register within 3 months of the conclusion of the liquidation.
Can I stop Compulsory Liquidation?
Options available to a company that is facing compulsory liquidation vary depend on how far along you are in the process. The only way to definitively stop compulsory liquidation is to satisfy the outstanding amount to the creditor in full, coming to satisfactory payment terms for both parties or by placing the company into a formal insolvency process.
Dependant on how far along the process your company is, there are a few options available:
- Company Administration
- Pre Pack Administration
- Creditors Voluntary Liquidation (CVL)
- Company Voluntary Arrangement (CVA)
- Raising Finance
What happens when a company enters Compulsory Liquidation?
Once the winding up process has finalised the company is placed into Compulsory Liquidation. Usually the official receiver is appointed liquidator of the company and it is their duty to comply with the duties of the liquidator.
If the official receiver feels it necessary or creditors vote to appoint a third-party liquidator, a Licensed Insolvency practitioner will be appointed to take the role of liquidator. Upon appointment it is then their duty to comply with the Insolvency Act 1986 and also comply with their duties as liquidator.
What are the liquidator’s duties?
A liquidator has a number of practical and statutory duties to adhere to in the normal course of a liquidation. These duties include:
- The maximisation of realisations from the assets of the company for the benefit of the company’s creditors
- Reporting to creditors on the progress of the liquidation and, where appropriate, seeking creditor approval for certain actions within the liquidation
- Where appropriate, the collation and agreement of creditor claims against the company
- The distribution to creditors of all available funds that have been realised through the liquidation process
- The investigation into, and the reporting upon, the conduct of the company directors prior to the company’s liquidation
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