Compulsory Liquidation is a procedure under the Insolvency Act to close down an insolvent company.
Insolvency of a company is most often shown by the inability of a company to pay those who it owes money to when they are due for payment. A worsening of this position can be evidence of insolvency.
Compulsory Liquidation, sometimes known as a Company Winding Up is normally led by a creditor who is pursuing the company for money.
The first formal stage of a Compulsory Liquidation is the presentation of a winding up petition by the disgruntled creditor.
Even after the winding up petition has been presented there may still be time to follow the procedure of a Creditors Voluntary Liquidation.
A Creditors Voluntary Liquidation is initiated by the company’s Directors rather than by its creditors.
One key difference between a Compulsory Liquidation and a Creditors Voluntary Liquidation is the ability to acquire assets and trade of the company may be possible through a Creditors Voluntary Liquidation but is unlikely to be possible in a Compulsory Liquidation.
The Compulsory Liquidation Trap
You should be aware that it is possible for a Director to place their own company into Compulsory Liquidation.
It is normal for a Director to use a solicitor to petition for their company’s compulsory liquidation.
The cost of liquidating a company via this route can be typically £2,000 with £2,500 to £3,000 being more typical. This amount should include all Court costs and disbursements.
If you do choose to follow this route be sure to use a solicitor to help you and not an unregulated, unqualified self proclaimed “expert” or “specialist”. At least with a Solicitor you will have some come back on advice given and work undertaken on your behalf.
Don’t forget though this money would cover the cost of Creditors Voluntary Liquidation. This may well also cover the cost of purchasing the assets back as the purchase price can in most cases also be used to pay for the cost of the Creditors Voluntary Liquidation.
Company Striking Off
Company Striking off or Company Dissolution is a method or removing a company from the register at Companies House.
Please also see the section on “Bona Vacantia” assets.
Company Striking off – Avoid the Trap
Companies House provides excellent guidance on how to go about having your company struck off the register at Companies House. Expect to pay £10 for this service.
Do not get taken for a ride by companies offering to assist with the striking off of your company and charging you for the privilege when it should only cost you £10.
We’ve seen companies trying to charge £500 or more for a something that you can do for yourself for only £10.