Compulsory Liquidation

Winding up a company

Compulsory liquidation is also known as compulsory winding up. This occurs when a company sells all of their assets with orders from the court, and can be requested by the firm's creditors when they are owed at least £750. The creditors also usually have the right to appoint the liquidator. A winding up process and be a rather expensive process, typically costing around £1000 and if a legal advisor is needed the cost can rise to £2500. These fees are made up of company search, swearing and petition costs, which are compulsory.

A compulsory liquidation only occurs when a company can no longer pay off their debts. This is proven in a number of ways. The first of these is if they have received a statutory demand, which gives the company 21 days to pay off their debt. This only occurs when the debt is more than £750. It is also important to know that the creditors are not permitted to combine their debts to reach the statutory limit. If the company is able to pay the debt in the future they will not qualify for compulsory liquidation as the debt must be a payable liquidated amount. The debt also cannot be reduced below £750 by a genuine cross claim and it must not be on disputed grounds. The debt can also be proved if the court is satisfied the company is unable to pay off their debts or if it is proven to the court that the value of the company’s assets is less than the amount of their liabilities, keeping contingent and prospective liabilities in mind. If this is the chosen method of proving the company’s debt it is important to know the creditor is not required to wait 21 days using the statutory demand process. The other ways the debt can be proven is if the court is satisfied to the extent that the company cannot carry out its main objective or if the company has deadlock in its management.

Liquidation of a company - water way to go

According to insolvency law, the liquidation of a company will usually take place when all other options have been exhausted and the business faces no choice but to sell off all of its remaining assets.

The spectre of insolvency

Insolvent is a term for a business that is unable to meet its debts and financial obligations as they fall due. Insolvency is not the same thing as bankruptcy.

What an insolvency practitioner can do for you

Insolvency practitioners are involved with solving an individual or company’s insolvency issues. They can provide vital information as to how is best to deal with the financial situation that they are in.