Compulsory liquidation is the process of forcibly closing down your limited company through the courts. This process usually starts when your insolvent company is issued a winding-up petition by a creditor when they believe an outstanding debt will not be paid. If the winding-up petition is deemed the right option by a court, a winding-up order will be issued, forcing your company into closure to pay its outstanding debts.
We understand that this can be a stressful time, but acting now means you can quickly find your available options. When a company is insolvent, a Creditors’ Voluntary Liquidation will most likely be the best solution, which can be entered into before the situation leads to a compulsory liquidation.
Our in-house liquidation team can assess your situation and guide you on your next steps. Contact us today for a free, no-obligation financial health check and put a stop to creditor pressure.
Compulsory liquidation is a strict legal process that must be followed to forcibly close a company.
A creditor starts the compulsory liquidation process by filing a winding-up petition at the court and then serving a copy of the petition on your company. This can be done by any creditor who feels that their outstanding debt will not be paid due to your company’s insolvency. In order to issue the petition, the creditor must either:
Banks and other creditors can find out about the winding-up petition as soon as it has been filed with the courts. This may result in your company’s bank accounts being frozen to prevent any further trading. The filing of the winding-up petition is an important date. This is because any transaction affecting the company’s funds or assets after this date is automatically reversible once the company is in liquidation unless the court decides otherwise.
Once the winding-up petition has been issued, you will have 7 days to respond. After 7 days, a notice will be placed in the Gazette advertising your company’s impending closure. At this point, your company bank accounts may be frozen to prevent any further trading.
If you need help managing a winding-up petition, don’t delay, contact our team at 0207 538 2222 today.
At this point, a court hearing will take place where a judge will assess the winding-up petition and decide whether or not your company should be liquidated. If the judge is in agreement with the winding-up petition, a winding-up order will be placed on your company, forcing it into compulsory liquidation.
The court will appoint an Official Receiver to start the liquidation process. Their first job will be to launch a full investigation of your company. This will include looking for wrongdoing and financial misconduct in accounts and paperwork, as well as your conduct and that of any other company directors. Any highlighted wrongdoing will result in the courts being notified and relevant action being taken against you.
In some cases, the Official Receiver will continue to work on your compulsory liquidation from start to finish. In other cases, an Insolvency Practitioner will be appointed at this stage to take over the liquidation process.
This stage of the compulsory liquidation will see the Official Receiver or Insolvency Practitioner assess company assets, such as stock, property, machinery, vehicles, etc. A statement of affairs will be drawn up to identify your company’s assets and liabilities. Funds received from the sale of your company’s assets will be distributed amongst your company’s creditors.
Once the assets have been sold and the funds distributed amongst your company’s creditors, the liquidation will be completed. Usually, around 3 months later, your company will be removed from the register at Companies House, meaning it is officially dissolved.
Any remaining debts that the sale of assets cannot settle will not be recoverable unless a personal guarantee covers them.
Any creditor with an outstanding debt of over £750 that hasn’t been paid within 21 days can issue a winding-up order. It is unusual for a creditor to issue a winding-up petition after only 21 days as this can be costly. Because of this many winding-up petitions are issued by HMRC. The normal process would be to try other methods of getting the debt paid such as payment reminders and CCJ’s.
Once a winding-up petition has been issued you will have 7 days to deal with the petition before notice of it is published in the Gazette.
Getting advice immediately from a liquidation expert is important if you wish to try and stop your company being placed into compulsory liquidation.
If you feel your company is at risk of compulsory liquidation, contact us today. Company insolvency requires immediate action to ensure you reduce the risk to yourself and your company’s creditors.
If a winding-up order has been issued then your company cannot avoid compulsory liquidation.
The winding-up petition is paid for by the creditor. This is a costly course of action, as the creditor will need to instruct solicitors to file the petition at court and serve it on the company. This can cost between £400 & £800 plus £2600 for the court deposit and an additional £332 filing fee.
The petitioner is entitled to be paid their costs from your company’s assets before any creditors are paid. If there are insufficient assets to cover these, the petitioner’s costs will not be repaid.
Despite being the petitioning creditor, apart from their petition costs they will not benefit from any special priority over the liquidated assets once your company has been liquidated.