Unless HM Revenue & Customs (HMRC) is the petitioning creditor (see below), the petitioning creditor will have made previous attempts to enforce its
debt and seek payment. This will either be through issuing a Statutory Demand, which has not been settled or dealt with within 21 days of it being
served, or a creditor who has obtained a County Court Judgment (CCJ) and after seeking to enforce the CCJ, their debt remains unsettled.
Alternatively, if HMRC is the petitioning creditor, then they are able to issue a winding up petition without first issuing a statutory demand or obtaining
a CCJ. However, before HMRC issue the winding up petition they will have usually sent numerous written correspondence to the company.
What are the consequence of Compulsory Liquidation?
- Once the petition has been filed in Court, which will likely be some weeks before the Court hearing when the Winding Up Order is made to place the
company into Compulsory Liquidation, all transactions out of the company’s bank account are void, unless the Court agrees otherwise
- All asset disposals, including payments to directors and their associates, between the date of the winding up petition and the winding up order are
void, unless the Court agrees otherwise
- On the making of the winding up order, all employees immediately become redundant
- On the making of the winding up order, all the directors’ powers cease and the Official Receiver becomes in charge of the company’s assets
- All contracts are terminated
- Due to the high costs associated, there is often little to no return to creditors involved
- The conduct of directors will be subject to thorough scrutiny and any evidence of wrongdoing can be investigated and reported which could lead to prosecution
- Winding up petitions must be advertised in the London Gazette and therefore become a matter of public knowledge, once a petition is advertised a company’s
bank will usually take steps to immediately freeze the account