Insolvency Procedure: The Liquidation Process
- There are two types of liquidation: compulsory and voluntary. The former is initiated by a Petition to the Court. The latter is initiated by a decision of the members of the Company.
- For compulsory liquidation, the Petition must state that the Company is unable to pay its debts.
- A Company is seen as unable to pay its debts if a Statutory Demand for £750 or more remains outstanding for over three weeks, a Court judgment is returned unsatisfied, or it is proved that the Company's liabilities are too great to be able to pay.
- The Court has discretion to refuse an Order to wind up the Company. The Court generally refuses where the debt owed is less than £750.00 or where the majority of creditors oppose the winding up.
- Where an Order is made, the Official Receiver of the Court becomes the liquidator of the Company. The Official Receiver is given the power to appoint a Liquidator.
- The Liquidator is responsible for collecting and distributing the Company's assets according to to the List of Priority.
- Once winding up is complete, the Liquidator may dissolve the Company. This is done by notice to Companies House. Alternatively, the Company can be struck off the register where it has ceased to trade.