What is a Compulsory Liquidation?
Compulsory liquidation is one of the most common corporate insolvency processes. It commences with the presentation of a petition to the Court. This is normally initiated by a creditor which is weary of chasing payments and is the final stage in a long process of a creditor trying to recover money they are owed. If payment has not been made, or a settlement reached, the company could eventually be forced into compulsory liquidation. Directors are also able to make application to the Court to place a company into compulsory liquidation.
Responding to a Winding-Up Petition
A compulsory liquidation is a court-driven process. On receiving a winding-up petition, the company directors should seek immediate advice if they are to have any prospect of saving the business, or there is a genuine answer to the creditor’s claim being ignored. Alternatively, it may be possible to place the company into a Creditors’ Voluntary Liquidation but this will require early mediation with the petitioning creditor. Nevertheless, if the business is still viable and could benefit from restructuring, an administration could be an option.
Advice on Compulsory Liquidations
As indicated above, it is imperative that the company seeks advice from an insolvency practitioner at the earliest possible stage and for more information we offer an initial free consultation to review the various options available and make recommendations for the best way forward.