A Compulsory Liquidation occurs when a creditor files a winding up petition in court and the court orders that the company be wound up. A creditor must satisfy the court that the company is unable to pay its debts, so will usually have obtained a county court judgment (CCJ) or have issued a statutory demand for payment to the company that has not been satisfied. HMRC can issue a winding up petition without needing a CCJ or to have issued a statutory demand. Issuing a winding up petition is usually a last resort for creditors.
What happens once the court issues the order?
When a court makes a winding up order the company is in compulsory liquidation. A civil servant called the Official Receiver is appointed as the liquidator, and will fulfil the same functions as a Licensed Insolvency Practitioner in a Creditors’ Voluntary Liquidation, including collecting and selling the company’s assets, making any remaining employees redundant and, if funds permit, agreeing the claims of creditors and making a distribution.
Who oversees complex liquidations?
In complex cases, particularly where there are significant assets, the Official Receiver may call a meeting of creditors to appoint a Licenced Insolvency Practitioner to act as liquidator. The court, when making the winding up order, may appoint a Licensed Insolvency Practitioner rather than the Official Receiver.
