Compulsory Liquidation
What is Compulsory Liquidation?
A Compulsory Liquidation (or compulsory winding up) is a Liquidation which is ordered by the court, usually on the petition of a creditor, the company or a shareholder.
There are a number of possible reasons for making a winding-up order. The most common is because the company is insolvent. A winding-up petition may also be presented by the Secretary of State for Trade and Industry on the grounds of public interest.
The company to be liquidated is first referred by the court to the
official receiver, who is a civil servant and an officer of the court,
and usually becomes liquidator on the making of the winding-up order. If
the assets are likely to cover the administrative costs, the official
receiver will usually call a creditors’ meeting to appoint a liquidator,
otherwise he will remain in office. The official receiver retains
responsibility for investigating the conduct of directors and other
officers as well as any other investigation work required.
Where a Compulsory Liquidation follows immediately on an Administration,
the court may appoint the former administrator to act as liquidator. In
these cases, the official receiver does not become liquidator, but
retains an investigative duty.
A Compulsory Liquidation is the only form of liquidation that may be applied to insolvent partnerships in England, Wales and Northern Ireland. Such circumstances may result in individual partners entering Bankruptcy or Individual Voluntary Arrangements.
For more information about Compulsory Liquidation, contact us.