Compulsory Liquidation

This is a court-based corporate insolvency procedure where the company is “forced” into liquidation, as a result of a petition from a creditor. The court is usually petitioned by a creditor (although this can also be done by company itself or the Secretary of State) and if certain criteria are met (such as it being shown that the company cannot pay its debts as they fall due), then the Court will make an order for the winding-up of the company.

The early stages of a compulsory liquidation will be handled by the government’s Official Receiver’s office who will interview company officers and carry out an investigation into their conduct. The Official Receiver may later pass the liquidation to an external insolvency practitioner or convene a creditors’ meeting to consider the appointment of the same, depending on the nature of the case and the desires of the company’s creditors. Irrespective of who deals with the case, it essentially involves the realisation of company assets, statutory reporting, payment of liquidation costs, adjudication and then payment of creditor claims (in order of priority) and the eventual dissolution of the company.

Creditors can approach an external insolvency practitioner to seek the appointment from the Official Receiver if they have concerns they wish to be further investigated or potentially if there are significant assets or claims to be pursued/realised.