Compulsory Liquidation

This is the scenario you most want to avoid but sometimes there is no alternative and it is better that you know what will happen and have advice available from our Insolvency Team.

Let us guide you through the process and help you emerge from this process with the best possible chance of starting again. We work closely with Insolvency Practitioners and can also work in tandem with your Accountants to achieve the best possible outcome for you.

What types of Liquidation are there?

  • Members’ Voluntary Liquidation (or Members’ Voluntary Winding up) – this is when the shareholders of a company decide to put it into liquidation, and there are enough assets to pay all the debts of the company, i.e. the company is solvent.
  • Creditors’ Voluntary Liquidation (or Creditors’ Voluntary Winding up) – this is when the shareholders of a company decide to put the company into liquidation, but there are not enough assets to pay all the creditors, i.e. the company is insolvent.
  • Compulsory Liquidation (or Compulsory Winding up) – this is when a Court makes an Order for your company to be wound up (a ‘Winding-up Order’) on the Petition of an appropriate person. If there is more than one Director, all the Directors must jointly present the Winding-up Petition – a single Director cannot present a Winding-up Petition.

If you are a Director or a shareholder and you are also a Creditor of your own company, you also can present a Winding-up Petition on the grounds that the company cannot pay its debts..

What are the alternatives to liquidation?
There are 3 possibilities:

  • an Informal Arrangement – you could consider writing to all your Creditors to see if a mutually acceptable agreement can be reached. It is best to set out a timetable of when payments will be made
  • a CVA – this is a formal version of the arrangement described above. The Directors would need to apply to the Court with the help of an authorised Insolvency Practitioner, who would supervise the arrangement and pay the Creditors in line with the accepted proposals
  • Administration – this is a streamlined procedure that gives your business some breathing space from any action by Creditors. A Court can grant an Administration Order to enable your business to:
  • survive, in whole or in part, as an ongoing business
  • organise a Voluntary Arrangement or compromise with its creditors
  • get a better realisation of assets than would be possible if the company went into liquidation