Compulsory Liquidation§
Definition§
Compulsory liquidation (also known as compulsory winding-up) is a legal process wherein a court orders the liquidation of a company. This process typically begins when a petition is presented to the court and the registered office of the company. Various entities, including the company itself, directors, creditors, an official receiver, or the Secretary of State for Business, Innovation and Skills, have the right to submit the petition. Compulsory liquidation is pursued on several grounds, such as inability to pay debts, reduction of members below the mandatory number, or the court’s opinion that it is just and equitable to wind up the company.
Examples§
- Insolvency Petitions: If a company is insolvent and unable to pay its debts, a creditor may petition the court for compulsory liquidation.
- Membership Issue: If the number of members in a company falls below the legal minimum, members or creditors could petition the court for winding-up.
- Fraud: In cases where the court finds that a company is engaging in fraudulent activities, it may order compulsory liquidation on just and equitable grounds.
- Failed Voluntary Winding-Up: If an attempted creditors’ or members’ voluntary liquidation does not adhere to legal stipulations, the court may enforce compulsory liquidation.
Frequently Asked Questions§
Q: Who can present a petition for compulsory liquidation? A: The petition can be presented by the company, the directors, a creditor, an official receiver, or the Secretary of State for Business, Innovation and Skills.
Q: What are the common grounds for compulsory liquidation? A: Common grounds include the company’s inability to pay its debts, membership falling below legal minimum, a special resolution adopted by the company, or the court deeming it just and equitable to wind up the company.
Q: What happens once the court grants a compulsory liquidation order? A: The official receiver becomes the interim liquidator, managing the winding-up process until creditors or members appoint another liquidator.
Q: What is the role of a provisional liquidator? A: A provisional liquidator, appointed by the court, manages the company’s assets and affairs from the petition date until a permanent liquidator is confirmed.
Q: Can a company oppose a compulsory liquidation petition? A: Yes, the company can oppose the petition by presenting a defense at the court hearing, aiming to demonstrate solvency or refute the petition’s grounds.
Related Terms§
- Liquidator: A person or entity appointed to manage the process of liquidating a company’s assets.
- Insolvency: The state of being unable to pay one’s debts.
- Creditors’ Voluntary Liquidation: A process where company directors choose to liquidate the company since it cannot pay its debts.
- Members’ Voluntary Liquidation: A process whereby the company elects to wind up while it is still solvent.
- Official Receiver: A government official responsible for the administration of insolvency matters, including serving as interim liquidator in compulsory liquidations.
Online References§
- Gov.uk: Liquidate a Company You Run
- Insolvency Service: Guide to Liquidation
- Companies House: Winding Up Company
- The Insolvency Act 1986
Suggested Books for Further Studies§
- Company Law by Lee Roach
- Corporate Insolvency Law: Perspectives and Principles by Vanessa Finch
- Guide to the Insolvency Act 1986 by David Raynor
- Business Law by Jane M. Friedman
- Liquidation Manual by Andrea Hayward-Yarrow
Accounting Basics: “Compulsory Liquidation” Fundamentals Quiz§
Thank you for exploring the depths of “Compulsory Liquidation” through this comprehensive guide and quiz. Continue expanding your knowledge and strive for excellence in the field of business and financial law!
