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Compulsory Liquidation

Compulsory liquidation occurs when a creditor attempts to force your company out of business in order to recover any debts owed to them. In order for the process to begin, the creditor(s) in question must first issue a winding up petition to the court. This is the most serious and troublesome insolvency procedure and is subject to the rules and regulations as specified by the Insolvency Act 1986.

If your creditors are successful in their petition, your company will be forced into liquidation and all of your company assets will be sold in order to raise money to repay the outstanding debts.

When can compulsory liquidation occur?

A creditor may only issue a winding up petition if your company owes them more than £750 and only once an official payment demand has gone unheeded. In addition to this, the action may also be forced if a creditor has an existing unpaid CCJ against your business.

The conclusion of this process will see the closure of your company and it will be removed from the register after 2-3 months.

Should I just let my company go into Compulsory Liquidation?

If you are considering letting your company go into Compulsory Liquidation, there are some important things that you should be aware of.

Whilst it may seem the easy option, there could be some effects on you, including:

  • professionals (e.g. banks, accountants and solicitors) often take a dim view on directors who let their company go into compulsory liquidation
  • your future credit terms from lenders may be badly affected
  • business people (including customers and suppliers) may see you as someone who has been complacent about your legal duties as a company director.

These effects may be felt when you put a company into a CVL. However, because you’re being pro-active and voluntarily putting your company into liquidation, in our experience the effects are likely to be far less with a CVL.

(If you’re not sure which type of liquidation is right for your situation, give us a call. We’ll give you free and confidential advice and help you select the best option.)

What are your options to stop compulsory liquidation?

The options available to you will largely depend on what stage you are at in the liquidation process. One option to prevent compulsory liquidation is to appease your creditors by agreeing a feasible payment plan or paying the debt in full.

If this is not possible, the best option for you is likely to be an insolvency procedure such as:

The team here at Clarke Bell can talk you through your options, and will provide professional advice on what is the best option for your current situation.

Contact us today for your FREE advice.

Thank you for all your help with the liquidation matters. You were a joy to deal with.

Thanks to the help I received from Clarke Bell, I am able to pay off my debts in a reasonable and realistic manner.

Our MVL was handled in a timely manner and I was kept informed of progress throughout.

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