Michael Chamberlaiin explains compulsory liquidation in this video.
What is it?
Compulsory Liquidation is where a winding up order is made by the court. A company will be ‘wound up’ by the courts following a petition issued by one of the following:
- The company.
- The directors.
- A creditor.
- A shareholder.
- An Administrator or Administrative Receiver.
A winding up order can be made on a number of grounds but the principal ones are as follows:
- The Company is unable to pay its debts as and when they fall due
- It is just and equitable (common in the event of shareholder disputes).
Who is Compulsory Liquidation for?
- Creditors who have the power to wind a debtor up with a view to the appointment of a liquidator to investigate the affairs of the company and its directors/shareholders.
- Directors requiring the cheapest possible liquidation.
How can Chamberlain & Co help?
Chamberlain & Co can assist the directors to complete the appropriate forms to initiate the process.
The Official Receiver is usually initially appointed as the liquidator. However, a meeting of creditors will normally be called, for the majority by value, to appoint a licensed insolvency practitioner as liquidator, who could be from Chamberlain & Co.
Once a winding up order is made the affairs of the company are dealt with by the local Official Receiver’s office who may call shareholders’ and creditors’ meetings at which a Liquidator other than the Official Receiver may be appointed.
The Liquidator in a compulsory liquidation deals principally with the realisation of assets and the agreement of creditors’ claims whilst the Official Receiver investigates the company’s affairs.
- For the company – creditors force the liquidation process and therefore there is no cost to the company in petitioning for the winding up.
- For the creditor – the creditor can stop the company trading.
- It can be the cheapest form of liquidation for the directors to initiate.
- For the company – the Official Receiver will thoroughly investigate the company and its directors.
- For the creditor – the Official Receiver’s fees will deplete the value of the company assets.
- It is a slower process than a CVL.
- No viable core business is normally salvaged from this process.