Compulsory liquidation order
Compulsory liquidation is where a company is ordered by the court to wind-up their business.
Compulsory liquidation may be applicable if debts of £750 or more is owed to creditors or debt is not repaid to creditors at a satisfactory level and is deemed to be unable to repay its debts.
The creditor will generally have appointed a solicitor or debt collector to recover debt as well as obtained a judgement from the court which was unsatisfied.
Once creditors have pursued a debtor for repayment and exhausted all avenues of debt recovery, the creditor may apply to the court for the winding up of a company.
Compulsory liquidation procedure
Once a petition has been made to the court, the petition will then be served on the company as well as being publicised in the London Gazette.
If the debt owed has not been repaid by the date of the hearing, the court will issue a winding up order which then places the company into liquidation and the affairs of the company is then passed into the hands of an Official receiver (OR).
An OR will look into what assets are owned by the company and may appoint an Insolvency Practitioner to administer the liquidation and to deal with the company’s assets to go towards repaying outstanding debts and any fees occurred.
Advantages of compulsory liquidation
As compulsory liquidation is brought about by the creditor, no costs are incurred to the company itself for the petition.
An investigation into the affairs of the company is undertaken by the liquidator who remains impartial to the reasons as to why the creditor bought about a petition.
Disadvantages of compulsory liquidation
If you are a director of a company that falls into Compulsory Liquidation, you will become subject to a comprehensive investigation which could lead to action disqualification as a company director.
Prevention of compulsory liquidation
It is important that if you feel your company may become subject to Compulsory Liquidation that you seek advice immediately.
Compulsory liquidation generally comes about because a creditor has tried everything to get a company to pay its debt and all debt recovery avenues have proved to be unsuccessful.
Compulsory liquidation can be avoided if there is an alternate solution to come to some form of agreement with your creditors which they are happy with and which will prevent court action being taken against you.
Call our specialist debt team on 08000 915 004 to find out how we could help you.