Company Liquidation

Compulsory Liquidation

Compulsory liquidation - winding up is one of the worst insolvency processes and should be avoided whenever possible.

​The process of compulsory liquidation involve ceasing the business to trade, selling company assets and distributing any proceeds to the creditors.

The company staff being made redundant and the company is struck off the register.

​If your company has been threatened with a winding up petition, the process of having your company wound up by your creditors has started.

Get in touch with our specialist team to discuss your situation and find the best possible option.

What is Compulsory Liquidation?

Compulsory liquidation occurs when a winding up petition is issued against the company and a winding up order is issued by the courts. The courts then appoint a liquidator, usually an insolvency practitioner, to begin the involuntary liquidation.

The liquidation process involves the company ceasing to trade and selling off company assets. The business’ employees will be made redundant, and the company will cease to exist once the liquidation process is complete.

The conduct of the directors will be thoroughly examined to investigate if they have fulfilled their obligations as a company director and if they could have taken steps to prevent the company becoming insolvent and minimise the amounts owed to creditors.

If it is established that the directors did not act in the best interests of the company and its creditors, the insolvency service may seek to prosecute the directors.

Compulsory Liquidation Consequences?

Once the process of compulsory liquidation begins, there isn’t much company directors can do without a court approval or agreement of the petitioning creditor. To avoid losing control of the situation, directors must take immediate action. Contact an insolvency practitioner to discuss your situation and find the best possible outcome.

​In most cases, compulsory liquidation means that the winding up petition will be advertised in the London Gazette, making it matter of public knowledge. This would potentially damage the directors’ business reputation and affect future contracts.

During the compulsory liquidation process, the conduct of the directors will be thoroughly examined. Any criminal wrong doing will be reported which may lead to the directors being prosecuted and any evidence of wrongful trading will be reported to the insolvency service. This can result in directors being disqualified from being present on any board of Directors for up to 15 years.

​Despite limited companies being separate entities, company directors still may be liable for any outstanding debt if during the liquidator’s investigation they find evidence wrongful trading or director misconduct. Directors may also be liable if they have signed any personal guarantees.

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