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Compulsory Liquidation

Authored by Phil Meekin

Phil Meekin

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Approximate read time: 1 minute

Compulsory Liquidation is the most serious insolvency procedure that an insolvent company may find itself in. It occurs when a Winding up Petition is issued against the company (usually by a creditor of the company) and a Winding up Order is given by the courts, who then appoint an ‘Official Receiver’ to begin the involuntary Liquidation of the company. Liquidation will involve the company ceasing to trade, followed by assets of the company being sold off in order to make payments to Creditors on a pro-rata basis. Employees will also be made redundant, and the company will cease to exist once the process is complete. The conduct of the Directors will also be thoroughly scrutinised in order to ascertain whether they could have taken steps to minimise losses to Creditors or prevented the company becoming insolvent. If it is decided that the Directors did not act in the best interests of Creditors, or may be guilty of ‘Wrongful Trading’ then evidence will be gathered and passed on to the Insolvency Service who may seek to disqualify or prosecute the Director(s) in question.

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