The compulsory liquidation is a legal process in which a company is forced to wind up its affairs and cease operations. This can occur when the company is unable to pay its debts or meet its financial obligations. The process is initiated by a court order and involves the appointment of a liquidator who is responsible for selling the company’s assets and distributing the proceeds to its creditors. The purpose of compulsory liquidation is to ensure that the company’s debts are paid off as much as possible and to bring an end to its operations.
Compulsory liquidation is a legal process where a company is forced to close down and its assets are sold off to pay its debts.
A company can be subject to compulsory liquidation if it is unable to pay its debts and a creditor applies to the court for a winding-up order.
Creditors, shareholders, or the company itself can apply for a compulsory liquidation.
A liquidator is appointed to take control of the company’s assets, sell them off, and distribute the proceeds to creditors in a specific order of priority.
The employees of a company in compulsory liquidation may be made redundant, and they may be able to claim certain statutory payments from the government.
In most cases, a company cannot continue to trade once it is in compulsory liquidation, unless the liquidator allows it for the purpose of winding up its affairs.
In some cases, a company may be able to enter into a company voluntary arrangement (CVA) or be sold as a going concern to avoid compulsory liquidation.
The length of time it takes to complete compulsory liquidation can vary depending on the complexity of the company’s affairs and the amount of assets to be realized.
In some cases, a company that has been compulsorily liquidated may be able to apply to the court to be restored to the register if it can demonstrate that it should not have been wound up in the first place.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 5th April 2024.
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