What is Compulsory Liquidation?

A Limited Company may be forced into liquidation by one or more of its creditors. In the event of non-payment of a debt over £750, a creditor may petition the court to have the company liquidated. The application to court is known as a Winding Up Petition. If the creditors application to court is successful, the insolvent company is presented with a winding up order and is placed into Compulsory Liquidation.

Compulsory Liquidation can often present problems to the Directors of the company during the investigations that are carried out by the Official Receiver. For instance, it can be much more difficult for Directors to defend against allegations of Wrongful or Insolvent Trading where a creditor has forced the insolvent company into liquidation rather than the Directors instigating the process voluntarily.