On hand to support you through Compulsory Liquidation with assistance and reassurance

Compulsory Liquidation can be daunting but the IRL team are here to help you understand what is happening and why.

What is Compulsory Liquidation?

A Compulsory Liquidation is different to a CVL in that it is initiated via a Winding-Up Petition issued to Court. More commonly issued by a creditor, the Petition will state that the company can no longer pay the debt owed. A Petition can also be presented by the company’s Directors or Shareholders.

Key considerations in a Compulsory Liquidation are:

The Official Receiver will initially be appointed as Liquidator

Creditors may request that an Insolvency Practitioner takes over (or the Official Receiver may pass the case to an Insolvency Practitioner where they consider the specialist skills of an IP are required)

An Insolvency Practitioner may also act alongside the Official Receiver as a Special Manager

All assets of the company will be sold for the benefit of creditors

How does a Compulsory Liquidation work?

A Compulsory Liquidation follows the same process as a Creditors’ Voluntary Liquidation, the only difference being how they are initiated.

During the Liquidation, the Official Receiver or an Insolvency Practitioner will identify assets and sell them for the benefit of creditors. Once this is complete, a dividend will be paid to creditors, dependent upon the value of the insolvent company’s business and assets.

Once all of the company’s assets have been realised, a distribution will be made to creditors dependent upon the value of the insolvent company’s business and assets.

The Liquidator is also responsible for investigating the conduct of the company’s Directors prior to the insolvency proceedings. They are required to submit a report to the Insolvency Service who may later commence disqualification proceedings against the Directors.

Compulsory Liquidation has no set time scale but will usually end following the Liquidator’s final report to creditors when the company will be dissolved and will cease to exist.

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