Compulsory Liquidation (or compulsory winding up) is the result of a winding up order made by the court as a consequence of a petition filed due to the non payment of an outstanding debt. A petition may be issued by a creditor, the company or a shareholder. If the company is unsuccessful in either reaching a settlement or successfully defending the petition a winding up order will be granted.
A winding-up petition may also be presented by the Secretary of State for Trade and Industry on the grounds of public interest.
There are a number of possible reasons for making a winding-up order. The most common is because the company is unable to satisfy its debts and is deemed to be insolvent. As a precursor the company may be served with a Statutory Demand requiring payment within 21 days, or by a judgment being obtained by a creditor and execution against the company’s goods being returned unsatisfied.
Upon the granting of a winding up order the Official Receiver (a civil servant and part of the Government Insolvency Service) would be appointed the Liquidator of the company. A subsequent process may result in the appointment of an external Insolvency Practitioner as the Liquidator.
Once you have received a winding-up petition your company has only a brief period to respond before the petition will be advertised in the London Gazette. Once advertised it is likely that the company bankers will freeze the account and effectively stop the company from trading. It is therefore critical that immediate advice should be sought upon receiving a Statutory Demand or a winding up petition. It is highly recommended, at the earliest possible stage in the Compulsory Liquidation process, that you speak with a Licenced Insolvency Practitioner for advice.