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What is a compulsory liquidation?

In brief

A compulsory liquidation:

– is an action of last resort by a creditor.

– means you lose control of the company.

– can lead to you being banned from being a director for 15 years.

What is a compulsory liquidation?

A compulsory liquidation occurs at the instruction of a court, following a formal request. The process is usually begun by a creditor who is unable to obtain payment by any other means.

The Official Receiver is often appointed as the liquidator.

The threat of compulsory liquidation can be used by creditors who are owed more than £750. Because of the costs involved, they will usually only act this way if reasonably confident that the company is able to pay.

If you receive the threat, or notice, of compulsory liquidation, it is important to act swiftly. You should also seek professional advice.

Who benefits from a compulsory liquidation?

Creditors benefit if the threat prompts payment of an overdue debt.

Who can initiate a compulsory liquidation?

The process is usually begun by a creditor. It is possible for others to initiate it, including the company itself or an administrator.

A request for compulsory liquidation can be made when a company is already under administration or going through a creditors’ voluntary liquidation.

Raising capital to avoid compulsory liquidation

Because of the costs involved, creditors won’t take this path lightly, and only for debts of a significant size. They will usually give warning of their intention to act in this way.

Should you receive notice of intent to launch a winding-up petition, leading to compulsory liquidation, it’s important to act very quickly before the process becomes more advanced.

If what you need is an injection of addition capital, talking to the experts at Business Recovery could help you find what you require. Our service costs nothing and we’ve helped hundreds of firms secure the finance they were looking for.

To find out more about how Business Recovery can help your business raise extra working capital from our network of funders, give us a call now.