Liquidation (Court Order/Compulsory)

WUC (forcible liquidation) is a formal insolvency procedure that results in a company’s forcible closure. Disgruntled or otherwise outstanding creditors of a limited company often start the compulsory liquidation process by filing a Winding Up Petition with the court (WUP). A WUP informs a firm that a petition has been filed to force the closure and liquidation of its assets.

How Long Does It Take for a Company to be Forced to Liquidate?

While the time between the issuance of a WUP and the appointment of an Official Receiver can be short, the forced liquidation process itself can take significantly longer than a CVL. 

This not only prolongs the situation for you as the director, but it also has ramifications for any staff you might have. For example, with compulsory liquidation, employees may have to wait up to a year to get any redundancy they are owed. 

If you have at least worked for two years with the company and have been on the payroll, you may be eligible for redundancy as a company director.

Who Can Begin the Procedure of Compulsory Liquidation?

Compulsory liquidation is a procedure that is usually initiated by a disgruntled creditor and then mandated by the court. Any creditor who has not been paid might file a petition to wind up your business. 

It can take a long time to reach the point of compulsory liquidation, and the creditor is likely to try a range of less severe collection measures before resorting to a WUP. These means of collection might range from informal negotiations to a County Court Judgment (CCJ) or the issuance of a statutory demand.

Why Would a Creditor Want a Corporation to Go Insolvent?

Compulsory liquidation is the most serious and last action a creditor can take against a firm that has failed to pay its debts. Winding up a corporation is frequently done as a final effort to pay the debt rather than out of contempt.

If a creditor has been pursuing a debt for a long time, they may believe that forcing the company to liquidate gives them the best opportunity of obtaining some of the money they are owed when the assets are sold. This will only be allowed if the company has sufficient assets or funds to make the distribution.