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Compulsory Liquidation & Winding Up Petitions

What is compulsory liquidation?

Compulsory Liquidation & Winding Up Petitions

What is compulsory liquidation?

If a company has no prospect of avoiding liquidation and typically where the company has little or no assets available for creditors, the company can be wound-up by petitioning the Court and placed into compulsory liquidation. On the making of the Winding-up Order by the Court, the Official receiver (Insolvency service) is appointed as liquidator. The Official Receiver (‘OR’), who is a civil servant in the Department of Business Innovation and Skills, is responsible for winding-up the company as well as considering and reporting on the conduct of directors. Where there are more significant assets the OR can arrange for an Insolvency Practitioner from private practice (such as mlm Solutions) to be appointed as liquidator to realise the assets and distribute to creditors.

The company directors and shareholders have no control over who is appointed liquidator, it is a decision made by creditors through the OR, or it may simply be the next Insolvency Practitioner on a rota maintained by the OR. Compulsory Liquidation is relatively expensive because there are substantial fees payable to the Insolvency Service on the realisation of assets as well as the costs and fees of the OR as liquidator.

View our Liquidation PDF. 

When to consider compulsory liquidation

This is generally the least preferable option for all concerned because it is expensive, bureaucratic and the directors have no control over who may be appointed. Compulsory liquidation is usually instigated by creditors who present a petition to Court where the company and its directors have taken no steps to arrange for the company to be wound-up in another process (eg Creditors’ Voluntary Liquidation).

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