What is Compulsory Liquidation?
A Compulsory Liquidation is a process of “winding up” a company via the courts. This is the outcome of the successful application of a Winding Up Petition. In these circumstances the Official Receiver (OR) is appointed as Liquidator.
How does a Compulsory Liquidation happen?
One or more of the company’s creditors will apply to the courts for a Compulsory liquidation upon application of a Winding Up Order.
A company can only receive a “Winding-Up order” from a Creditor if they owe more than £750 and have failed to pay. Failure to pay can be either an unpaid county court judgement or a formal demand which is still outstanding.
Once “Compulsory Liquidation” is facilitated the assets of the company are sold with the proceeds being distributed to repay the outstanding debts it owes to its creditors.
What are my options if facing a Compulsory Liquidation?
If you are facing a Compulsory Liquidation and a Winding Up Petition, then depending on how far along you are in the process, the options to rescue and recover become restricted. The only way to definitively stop the process will be to satisfy any outstanding amounts to creditors in full. Another option includes agreeing a payment plan for both parties. If HMRC are seeking the compulsory liquidation, then a Time To Pay (TTP) arrangement should be considered.
Alternatively placing the company into a formal insolvency process such as an Administration can be explored.