Often the last resort for creditors; a compulsory liquidation is ordered by the court, on the petition of a creditor, the company or a shareholder. If they are owed more than £750 they can issue a statutory demand first, requiring payment within 21 days. If the company fails to pay within this time period, insolvency can be established. The court needs to be satisfied the debt is owed and the company insolvent.
Following the making of a winding-up order, the Official Receiver becomes the Liquidator. If the assets are likely to cover the administrative costs of the liquidation, the Official Receiver may convene a meeting of creditors to appoint a licensed insolvency practitioner to act as Liquidator. If not, the Official Receiver may remain in office or can apply to the Secretary of State to appoint a licensed insolvency practitioner instead.
It is important to note that the Official Receiver retains responsibility for investigating the conduct of directors and company officers, even in the circumstances when the liquidation is passed to a licensed insolvency practitioner.
The Liquidator will continue to have the duties of realising the assets of the company for the benefit of creditors and, if possible, agreeing creditors’ claims in order to make a distribution.