Compulsory Liquidation (Compulsory Winding up)
The winding up process is usually commenced by a creditor of the company who has either issued a statutory demand, has an unsatisfied judgement or can show that the company cannot pay its debts as they fall due. Other parties can also place a company into compulsory liquidation; directors, shareholders, Administrators, Supervisors, Administrative Receivers, etc.
The liquidation process is usually handled by a solicitor as it is a court process.
The party petitioning for the liquidation puts the relevant documentation in court together with a fee and a date is set for a court hearing. Documents must then be served on certain parties.
The petition is then advertised. This results in the company's bank account being frozen. At this stage other creditors may join the petition so that even if the company agrees with the petitioning creditor not to continue (e.g. if paid) the other creditors can continue with the petition.
The court then hears the petition and decides whether the company should be placed into liquidation. The company can defend the petition. The court may adjourn the petition to allow time for negotiation.
If a winding up order is made the Official Receiver (OR) becomes the liquidator. The directors will be required to attend a meeting with the OR and prepare a statement of affairs.
If there are assets to be realised the OR may convene a meeting of creditors for the purpose of appointing an Insolvency Practitioner to act as liquidator. Alternatively they may apply to the Secretary of State for an Insolvency Practitioner to be appointed off the OR rota.
The liquidator may then convene a meeting of creditors to form a liquidation committee and to determine the basis of their remuneration.
The Insolvency practitioner would then deal with the affairs of the company whist the OR would investigate the circumstances of the appointment. Once any assets have been realised the net funds would be distributed to creditors.
Once complete the liquidation would be closed and eventually the company dissolved.
