Compulsory liquidations
Compulsory Liquidation, usually referred to as "Winding-Up", is the process to wind up
an insolvent company through the courts.
Insolvent, what does this mean?
S123 IA 1986 sets out the definition of Insolvency:- Creditor(s) are owed more than
£750 and have either served a 21 day demand which has not been met or judgment
has been given or it is proved to the satisfaction of the Court that the company cannot
pay its debts as they fall due or the company's liabilities exceed its assets including
contingent liabilities.
WHEN CAN A COMPULSORY LIQUIDATION OCCUR?
Compulsory Liquidation Winding-up is a court procedure usually initiated by a creditor
of the company when all other debt collection procedures have failed. When a company
is insolvent and fails to pay its debts, creditors can take steps to wind up the company
by issuing a petition to Court. The procedure can also be used by the directors and
shareholders of an insolvent company. There are other parties who can petition
including the Secretary of State, the Official Receiver and a Supervisor of a Company
Voluntary Arrangement.
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