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         E-mail: suzi@purnells.co.uk 

A company enters into a Compulsory Liquidation when a creditor issues a winding up petition and a Judge subsequently makes a Winding Up Order.

When creditors do not receive payment, they may commence to pursue the company through the Courts.  Once a creditor has obtained a County Court Judgment (CCJ) against the company, they may commence recovery action.  Such recovery action could be:

  • The instruction of a Bailiff
  • The placing of a Charging Order over property owned by the company
  • A Third Party Debt Order
  • The issue of a Winding Up Petition

Another way in which a creditor could pursue the company is to serve a Statutory Demand.  The company would then have a period of three weeks in which to pay the debt.  Should the debt not be paid during that time, then the creditor is in a position to issue a Winding Up Petition. 

Should a creditor issue a Winding Up Petition, then upon that document would be the date of a court hearing.  Assuming that the petition goes unchallenged, the Court at the hearing, would make the Winding Up Order and the company then would be placed into a "Compulsory Liquidation".

An individual known as the Official Receiver would be initially be appointed to deal with the Liquidation.  His main duties within that Liquidation would be to:

  • Realise all of the company assets
  • Correspond with creditors
  • Undertaking an investigation into the financial dealings of the company
  • Submit a report regarding the directors duties (amongst other things)

‚ÄčOccasionally, the Official Receiver will appoint a private Insolvency Practitioner to take over his role as Liquidator.  

The cost of placing the company into a Compulsory Liquidation is borne by the creditor who issued the petition, and not by the directors of the company.  The petitioning creditor would be repaid their petitioning costs out of the first realisations made by the Liquidator.  

When a company is placed into a Compulsory Liquidation, the directors are often asked by the Official Receiver why hadn't they taken positive action themselves before the situation reached this far.  A director has a duty to obtain professional advice should they believe that their company is insolvent and has no real prospect of returning to a solvent position.   Within a Compulsory Liquidation, the directors also have no control over the timing of the events, nor can they nominate a particular Insolvency Practitioner to be the Liquidator of the company. 

It is always recommended that insolvency advice is sought at an early stage, as there are many options available to a company (to include continuing to trade).  These options are much reduced should matters be left too long and a winding up petition has been issued.

For a free, confidential, initial meeting (in person at our offices in Newport, or alternatively on the telephone), please contact Suzi Purnell on 01633 214712 or e-mail: suzi@purnells.co.uk 

compulsory liquidation