Director information hub: Compulsory liquidation
Compulsory liquidation occurs when a court orders the liquidation of a company.
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Compulsory liquidation
A company can be wound-up by court order. A court-ordered liquidation usually happens when a petition has been presented by one or more of its creditors, because a company cannot pay its debts.
In England and Wales a company is regarded as not able to pay its debts if a creditor:
- is owed more than £750
- can prove the company cannot pay the debt
In Scotland and Northern Ireland a company is regarded as not able to pay its debts if a creditor:
- is owed more than £750
- presents a written demand in the prescribed form (known as a statutory demand) to the company
- the company fails to pay, secure or agree a settlement of the debt to the creditor’s reasonable satisfaction
Parties who can petition for the winding up of a company include:
- the company itself
- the company’s directors
- any creditor or creditors
- a contributory or contributories (this can include shareholders of the company)
- the Secretary of State
- an administrative receiver, administrator or supervisor
Full guidance on compulsory liquidation in England and Wales.
Full guidance on compulsory liquidation in Scotland.
Full guidance on compulsory liquidation in Northern Ireland.
When a company goes into liquidation, the liquidator will generally ensure that any ongoing trading stops and company records are collected, to take control of the company and deal with its affairs.
Although your director duties cease, you must fully co-operate with the liquidator.