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What is Compulsory Liquidation?

Compulsory liquidation, also known as involuntary liquidation, is a legal process by which a company’s assets are liquidated and converted into cash to repay its creditors.

This process is initiated by a court order following a petition from creditors or regulatory authorities due to the company’s inability to meet its financial obligations.

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Petition Filed

Creditors or regulatory bodies file a petition for the company’s compulsory liquidation. The petition outlines the company’s financial distress and inability to pay its debts.

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Court Hearing & Order

The court reviews the petition at a hearing and determines the validity of the claim. If they are convinced the company is insolvent, they issue a winding up order.

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Liquidator Appointed

Upon issuance of the winding up order the official receiver is appointed to take over the affairs of the company.

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Company Assets Sold

The liquidator assesses the company’s assets and begins liquidating them. Assets include any physical assets, intellectual property and accounts receivable.

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Distribution To Creditors

Once all monies have been realised, (this could include chasing directors for personal assets / money) a distribution will be made to creditors in their priority order.

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Company Dissolved

Once the insolvency process has finished, the company is officially dissolved at companies house and will no longer exist. Any remaining debts are written off unless a director has provided a personal guarantee.

Loss Of Control

The business owners and directors have to hand over control to the Official Receiver and let them take charge.
The company’s reputation will be damaged, there is no way to limit people finding out due to the public nature of the process being advertised in the London Gazette.

Legal Consequences

Compulsory Liquidation is the final step a creditor can take to recover debt. There will be a thorough examination of the directors conduct and legal action will be brought if the liquidator feels there has been wrongful or fraudulent trading.
Directors can be held personally liable for debts if they are found to have traded recklessly in a manner detrimental to creditors.

Yes – HMRC can absolutely chase a dissolved company. They have six years from the date of dissolution and twenty years if they believe and fraud or negligence has taken place.

No it will not. Being the director of a limited company limits the liability to the company. That is providing you have acted as any reasonable person would whilst running the business and not signed up to any personal guarantees or have an overdrawn directors loan account.

Please contact us at your earliest convenience. We can provide guidance on the Company’s ability to repay these amounts over time and assist in negotiating a suitable time-to-pay arrangement with HMRC on your behalf. Acting promptly increases the likelihood of HMRC providing assistance.

Yes, you can. However, should your conduct as a director be called into question for the company you were a director of, you could be banned at a later stage.

Fees vary depending on the level of work that needs to be undertaken and the level of specialism that needs to be given.

Disqualification under the Company Directors Disqualification Act bars former directors from holding director positions in UK-linked limited liability or overseas companies. They are also prohibited from involvement in setting up or managing such entities.

What is Compulsory Liquidation?

Understanding the process

Implications For Directors

Frequently Asked Questions