What is compulsory liquidation?

Compulsory liquidation is a liquidation process brought against a company by a creditor or creditors owed money by the company, who believe that the only option to be repaid is for the company to go into liquidation. It is therefore a court liquidation process brought against the company in liquidation without requiring any cooperation from the company in liquidation.

Once the order is granted the liquidation process will commence with the appointment of a liquidator. The liquidator over the company or companies in liquidation will take over from the company, and the directors can no longer run the company from the date of liquidation. The liquidator’s role is to bring liquidation sales in order to liquidate assets of the business. Once monies are brought into the company in liquidation in that way, the liquidator will distribute the assets for the benefit of creditors.

Voluntary liquidation

Voluntary liquidation can be used by a solvent company or an insolvent company.

Members Voluntary Liquidation

A liquidation process brought by the shareholders/members. In order to liquidate my company, the members and the company must have fulfilled certain criteria, namely that the company must be solvent and able to pay all its creditors within twelve months as part of the liquidation process.

Creditors Voluntary Liquidation

This involves the liquidation of a company that is insolvent and unable to pay its creditors. Therefore, whilst it is called a ‘voluntary’ liquidation, it is inevitably a last resort for that company or companies in liquidation who are unable to continue to trade while meeting all its debts.

In both Members Voluntary Liquidation and Creditors Voluntary Liquidation, a liquidator is appointed in the same way as with a compulsory liquidation, in order to liquidate assets by way of liquidation sales to bring money back into the company or companies in liquidation to be distributed.

What is the difference between compulsory liquidation and voluntary liquidation?

The main difference between voluntary liquidation and compulsory liquidation is that with compulsory liquidation this is a procedure brought against a company rather than with company cooperation. Compulsory liquidation is usually brought by a company’s creditors whereas Creditors Voluntary Liquidation and Members Voluntary Liquidation is brought by the company itself.

Contact the company liquidation experts today

At Francis Wilks & Jones our team of liquidation experts act on all aspects of liquidation, and for creditors looking for repayment of their debts via compulsory liquidation. We can talk you through the processes for each in more detail if you contact one of our expert team today.