Compulsory liquidation


Compulsory liquidation is usually the result of a hostile process initiated against an insolvent company’s wishes. This type of liquidation tends to be costly and litigious, and any person or company involved in proceedings for compulsory liquidation should immediately contact an insolvency lawyer.

Financial repercussions for not dealing with proceedings promptly and competently can be severe.

How does compulsory liquidation take place?

Compulsory liquidation is begun by a petition to the court by creditors of company, directors of the company, the Secretary of State or the company itself. The petition is advertised within seven days of service of the petition and a hearing at court is held.

The court may dismiss the petition, adjourn the hearing or make an order to wind up the company.

If the court does make an order to wind up the company it will then notify the Official Receiver who will advertise the winding-up order. A meeting of creditors may be called and the assets realised and distributed. 

Are directors more responsible under compulsory liquidation?

A key difference between voluntary and compulsory liquidation is that under compulsory liquidation the Official Receiver is under a duty to investigate the affairs of company and the reasons for the company’s failure.

This can lead to actions against directors of the company for fraudulent or wrongful trading, if, for example, the directors knew the company to be insolvent and continued to trade, resulting in greater losses to creditors of the company.

If you would like to obtain legal advice on compulsory liquidation or advice about winding up an insolvent company, Contact Law can put you in touch with a local specialist Insolvency Solicitor free of charge. So, if you have any questions or would like our help in finding local Insolvency Solicitors please call us on 0800 1777 162 or complete the web-form above. 

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