Restructuring and Insolvency

Compulsory Liquidations

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What is compulsory liquidation?

An insolvent company is placed into compulsory liquidation by a Court order, which has been granted to a dissatisfied creditor (directors and shareholders can also petition to wind up the company however this is less common).The creditor lead process typically involves a creditor issuing a statutory demand which is not settled within 21 days, following which a winding up petition is presented detailing a point in the future for the petition to be heard at Court, at which a Judge will make a winding up order. HMRC need not issue a statutory demand and can instead go straight to petition stage.

Once the Order has been made, an Official Receiver will be appointed to handle the liquidation of the company’s assets. The liquidation will remain under the control of the Official Receiver, unless he considers that a corporate insolvency practitioner should be appointed in his place or if a sufficient value of creditors request the appointment of a corporate insolvency practitioner instead.

What happens in the liquidation procedure?

Once the petition has been triggered by the petitioner (the person seeking the winding up of the company), the following process will take place:

  1. If the company’s paid up share capital is more than £120,000 then the petition must be submitted to the High Court. If it is less than £120,000 then it must be submitted to the Court closest to the company’s registered office. The submission can be done online
  2. A date will be set for the petition to be heard. This is usually between four and six weeks once the petition has been presented to the Court
  3. The date will be endorsed on the petition. That petition will then be sent to the company in question
  4. As the date for petition is four to six weeks away, the company then has time to take advice before the Court hearing
  5. At least seven days after the petition has been served, but not less than seven days before the date of the hearing, the winding up petition will be advertised in the London Gazette and then becomes public knowledge. Once the advertisement is placed, the company’s ability to continue may be affected as bank accounts can be frozen and suppliers may choose to cut ties once they become aware. Even if the debt has been settled with the petitioning creditor, other creditors waiting for payment may see the London Gazette advertisement and from there can ask to be substituted on the petition in place of the original petitioner
  6. If the debt is still outstanding on the date of the hearing, a winding up order will usually be made, unless an adjournment is requested for a specific purpose. Once this order has been made by the Court, the company is in liquidation. Control of the company’s affairs is then passed to the Official Receiver’s Office, who takes responsibility of controlling the company’s assets
  7. The Official Receiver’s Office will also be responsible for conducting detailed investigations into the conduct and actions of directors and the company’s affairs prior to it being placed into liquidation

How ICS can help you

Here at ICS, we have years of experience helping both sides with winding up petitions. So no matter whether you are a director of a company that has been presented with a petition, or you are a creditor looking to start the process, we can help you.

If you are a director:

  • We can explore all options available to you following a winding up petition being presented – including proposing a CVA as an alternative to avoid being wound up or assist in sourcing funding to settle the petitioning debt
  • We can assist you with appealing against the winding up order should you feel there is a reason to. If you believe this is the case, please get in touch with our team as soon as possible.

If you are a creditor

  • We can help to present the winding up petition to the company that owes you money
  • We can seek appointment as compulsory liquidator from the Official Receiver following the making of the winding up order to conduct a thorough enquiry into the affairs of the company

How do I find out more about compulsory liquidation?

We can help with the entire compulsory liquidation process regardless of which side you sit on. Our experts can provide advice and guidance to help establish a satisfactory solution for all parties involved. Visit our contact us page and fill in the form to get in touch or give our team a call on 0800 731 2466.

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