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Compulsory liquidation


1. What is 'compulsory liquidation'?

Compulsory liquidation of a company is when the company is ordered by a court to be wound up.

2. Which courts can order a compulsory liquidation?

The High Court, or a county court with the appropriate jurisdiction, may order the winding-up of a company. This may be, for example, on the petition of a creditor or creditors on the grounds that the company cannot pay its debts.
A company is regarded as unable to pay its debts if, for example, a creditor:

is owed more than £750;
presents a written demand in the prescribed form (known as a statutory demand (Form 4.1) to the company; and
the company fails to pay, secure or agree a settlement of the debt to the creditor's reasonable satisfaction.
Thereare other situations where a company is deemed unable to pay its debts. Please read the relevant legislation.

The court may also order the company to be wound up on the petition of:

the company itself;
the company's directors or one or more members;
the Secretary of State for Business, Innovation and Skills
the Financial Services Authority (formerly the Securities and Investment Board); or
the Official Receiver.
In the case of a European company (SE) registered in GB, the Secretary of State may petition the Court for a winding up order on the grounds that it appears that the SE does not have both its head office and registered office in GB. For more information on SEs, please see our guidance on 'The European Company: Societas Europaea (SE)'.

3. Must the petition be advertised?

Unless the court directs other arrangements, the petition must be advertised in the Gazette.

4. What appears on the company record held by Companies House?

If the petition is successful, the company must send the winding-up order to the Registrar straightaway and it will be placed on the company's public record.

The petition itself is not presented to the Registrar so it will not appear on the public records.

5. Who acts as the liquidator when an order is made to wind up the company?

The Official Receiver becomes liquidator on the making of a winding-up order against a company, unless the court orders otherwise.

6. What are the duties of the Official Receiver as liquidator?

The Official Receiver has a duty to investigate the company's affairs and the causes of its failure.

He also decides whether to call meetings of the creditors and contributories (that is, those people liable to contribute to the assets of the company if it is wound up) for the purpose of appointing a liquidator in his place.

If he decides not to call meetings, he must notify the creditors, contributories and the court of his decision.

On the other hand, if he decides to call meetings, a liquidator may then be appointed in place of the Official Receiver. The liquidator must notify the Registrar of his or her appointment immediately.

If the position of liquidator becomes vacant at any time, the Official Receiver becomes the liquidator for the duration of the vacancy.

7. What happens when the winding-up is complete?

When the Registrar receives notice from the liquidator of the final meeting of creditors or notice from the Official Receiver that winding-up is complete, the Registrar will register it and publish its receipt in the Gazette.

Unless the Secretary of State directs otherwise, the company will be dissolved 3 months after the notice was registered at Companies House.

If the Official Receiver, acting as liquidator, is satisfied that the company's realisable assets (that is, assets which could be sold or disposed of to raise money) will not cover the expenses of winding-up and that no further investigation of the company's affairs is necessary, he may apply to the Registrar for early dissolution of the company. The company will be dissolved 3 months after the application is registered at Companies House.