Close Menu
UK Liquidators

Compulsory Liquidation

Low-Cost Liquidation
100% Confidential
Stop HMRC & Creditor Pressure
Partner-led Service

What happens when a creditor petitions for your company to be liquidated?

Compulsory liquidation is a legal process that involves selling off your insolvent business’ assets and closing the company down. The procedure is similar to voluntary insolvent liquidation, but because a creditor has initiated it, directors are more exposed to accusations of wrongful trading.

When a company becomes insolvent, directors must stop trade straight away in order to protect their creditors’ interests. By waiting for a creditor to force compulsory liquidation, also known as forcibly winding up a company, it’s easy for directors to unwittingly breach UK insolvency laws.

What is compulsory liquidation?

When a creditor successfully petitions for a company to be wound up, a liquidator takes control of the company and its affairs. This is typically the Official Receiver (OR) initially, but an independent licensed insolvency practitioner (IP) may be appointed to carry out the liquidation.

All business assets are sold at auction to generate funds for creditors, and the company name is removed from the register at Companies House. An investigation into director conduct also commences on liquidation, leaving directors at risk of serious allegations regarding the downfall of their company.

So when can a creditor force a company into liquidation, and what are the ramifications for directors?

Worried about your Bounce Back Loan?

If you are a limited company director worried about how you are going to repay your Bounce Back Loan, we are here to help. As licensed insolvency practitioners we can talk you through your options when it comes to repaying your outstanding Bounce Back Loan, as well as handling all negotiations with creditors on your behalf. Call our team today on 0800 063 9262 .

When can a creditor force compulsory liquidation?

Certain conditions must be met before a creditor can make a winding up petition. If you owe a debt of £750 or more and a creditor has served a 21-day statutory demand on your company that remains unpaid, they can force compulsory liquidation.

Once the petition is submitted, you can’t sell or otherwise dispose of any business assets. If you take no action to repay the debt or challenge the petition, your business bank accounts will also be frozen when the petition is publicly advertised in the Gazette.

If you’re found to have traded wrongfully, or other forms of misconduct are uncovered, you face disqualification as a director for up to 15 years, and potentially personal liability for business debts.

How to avoid being forced into liquidation by a creditor

You can avoid the considerable harm that compulsory liquidation inflicts on your business’ reputation and on yourself as a director, by entering a procedure called Creditors’ Voluntary Liquidation (CVL).

Being proactive in dealing with your company’s insolvent situation protects your creditors, and also helps you and other directors to meet your legal obligations under UK insolvency law.

Although the end result is the same, this route to closure demonstrates your intent to protect creditors and minimise their losses. But how do you pay for a CVL when the business is insolvent? Isn’t it preferable from a financial point-of-view to allow a creditor to force compulsory liquidation on the company?

Don’t wait for a creditor to wind up the company

If the cost of a CVL can’t be wholly financed through the sale of assets, you may be required to use personal funds to cover the cost of the professional fees associated with liquidating your company. Depending on your situation, you may be able to claim statutory redundancy as a director so long as you are also classed as an employee of the business.

In order to be eligible for director redundancy, you must have worked under a contract of employment for at least two years, for a minimum of 16 hours per week. If you also receive a regular salary through PAYE, you may be able to make a claim for redundancy pay and other statutory entitlements. The amount you will be entitled to will depend on a number of factors including your age, length of service, and salary taken.

For more information on compulsory and voluntary liquidation, please contact our expert team at UK Liquidators. We’ll be able to advise on director redundancy, and whether you’re eligible to make a claim. Please get in touch to arrange a free, same-day consultation - we operate an extensive network of offices around the UK.

Jonathan Munnery
Partner

If you are considering liquidation for your limited company, taking advice from a licensed insolvency practitioner can help you understand your options.

Is liquidation the right option for you?

Take our 60 second test and find out

Company health risk assessment
Types of liquidation available
Alternatives to liquidation
Understand your next steps
60 Second Liquidation Test
Pages related to What happens when a creditor petitions for your company to be liquidated?
Group Of Busy Business People
Compulsory Liquidation
Desktop2
Creditors’ Voluntary Liquidation (CVL)
Desktop1
Members’ Voluntary Liquidation (MVL)
Did you know?
Are you eligible to claim Director Redundancy?
As a Limited Company Director you may be entitled to claim Director Redundancy - Average UK claim is £9,000*.
Ready to Liquidate?
Express Liquidation Service
Ready to start liquidating today? Complete the form and a member of our team will be in touch.
Please note: By completing this form you are not liquidating your company
Contact the UK Liquidators Team

If you are considering liquidation for your company, taking expert advice at an early stage is crucial. At UK Liquidators, our team of licensed insolvency practitioners are committed to providing limited company directors with the help and advice they need to make an informed decision.

  • Free initial consultation
  • Strictly confidential
  • Fully licensed insolvency practitioners
  • Local office support
  • Named case handler throughout
Logo Tma
Logo Business Recovery
Logo Cse
Logo Iip

Looking for immediate support?

Complete the below to get in touch

 
 
 
 
 
100% Free & Confidential Advice