Compulsory Liquidation Advice

 

 

Michael Chamberlaiin explains compulsory liquidation in this video.

 

What is it?

Compulsory Liquidation is where a winding up order is made by the court. A company will be 'wound up' by the courts following a petition issued by one of the following:

 

  • The company.
  • The directors.
  • A creditor.
  • A shareholder.
  • An Administrator or Administrative Receiver.

 

A winding up order can be made on a number of grounds but the principal ones are as follows:

 

  • The Company is unable to pay its debts as and when they fall due
  • It is just and equitable (common in the event of shareholder disputes).

Who is Compulsory Liquidation for?

  • Creditors who have the power to wind a debtor up with a view to the appointment of a liquidator to investigate the affairs of the company and its directors/shareholders.
  • Directors requiring the cheapest possible liquidation. 

How can Chamberlain & Co help?

Chamberlain & Co can assist the directors to complete the appropriate forms to initiate the process. 

 

The Official Receiver is usually initially appointed as the liquidator. However, a meeting of creditors will normally be called, for the majority by value, to appoint a licensed insolvency practitioner as liquidator, who could be from Chamberlain & Co.

 

The Process

Once a winding up order is made the affairs of the company are dealt with by the local Official Receiver's office who may call shareholders' and creditors' meetings at which a Liquidator other than the Official Receiver may be appointed.

  

The Liquidator in a compulsory liquidation deals principally with the realisation of assets and the agreement of creditors' claims whilst the Official Receiver investigates the company's affairs.

 

Advantages

  • For the company - creditors force the liquidation process and therefore there is no cost to the company in petitioning for the winding up.
  • For the creditor - the creditor can stop the company trading.
  • It can be the cheapest form of liquidation for the directors to initiate. 

 

Disadvantages

  • For the company - the Official Receiver will thoroughly investigate the company and its directors.
  • For the creditor - the Official Receiver's fees will deplete the value of the company assets.
  • It is a slower process than a CVL.
  • No viable core business is normally salvaged from this process.