COMPULSORY LIQUIDATION

Compulsory Liquidation is the worst-case scenario for a viable business struggling with debts. Learn the steps you can take to avoid it here.

Company Insolvency Advice has been helping company directors with struggling businesses claim redundancy (and other statutory entitlements such as holiday pay and unpaid wages) when the company enters liquidation. The average UK claim is around £12,000!

How We Can Help

Take proactive steps to avoid Compulsory Liquidation

Learn how to respond to a Winding-Up Petition or pressure from creditors

Receive support in negotiating new payment terms to help you manage your debts

Get advice on strategies to improve cash flow, recover from financial difficulties and rescue your business

Contact us today

  • How Can I Avoid Compulsory Liquidation?

If your business is struggling with cash flow or unable to pay debts, it is important to act as quickly as possible. By approaching the problem proactively, as soon as it arises, you can benefit from a number of rescue solutions that can return your business to solvency and allow it to flourish, but over time, these opportunities will diminish. Finally, if you do not resolve your financial situation, you will be faced with the closure of your company.

In some cases, you will have a choice in how this unfolds – you may be able to arrange the sale of your business under a Pre-Pack Administration, or go into Voluntary Liquidation. In other circumstances, creditors may force your business into Liquidation. 

Thankfully, you will have several opportunities to avoid Compulsory Liquidation, as creditors must issue a Statutory Demand for payment and then a Winding-Up Petition first. This will only result in Compulsory Liquidation if you fail to act on these warning signs and resolve your issues with your creditors, so it is vital to respond proactively as soon as any financial difficulties arise.

If you are concerned about business debts, contact the experts at Company Insolvency Advice as soon as possible. No matter whether the problem has just arisen, or escalated to a formal procedure, there may be steps you can take to rescue your business. Thanks to our many years of experience, we can advise you on the most viable solutions to fit your organisation’s circumstances and help you to choose the right path forward.

Call us at the earliest opportunity on 0800 999 0666, or use our online enquiry form to request a call back at your convenience.

  • What Is Compulsory Liquidation?

Compulsory Liquidation is a procedure in which the court orders an insolvent company to close. When a business cannot pay its debts, its creditors may be able to pursue a Winding- Up Petition, which is the most common route to Compulsory Liquidation. We have described this process in detail below.

Before your business faces Compulsory Liquidation, there are several steps that creditors must take. In each of these cases, you will be aware of the actions your creditors have taken, which can give you the opportunity to respond and resolve the problem before Compulsory Liquidation becomes the only path forward. There are possible solutions you can employ at any of the stages listed below to avoid Liquidation, but you must take action as soon as possible.

Statutory Demand

The first stage is a Statutory Demand. Any creditor that is owed £750 or more by your business can issue a Statutory Demand, which represents a formal request for payment of the debt and serves as a legal basis for the creditor to escalate the matter. You will usually have 21 days to pay the debt following receipt of a Statutory Demand. If you do not, and you are unable to reach any alternative agreement with your creditor, they can take the matter to the court.

Winding-Up Petition

If you are unable (or refuse) to pay your debt within 21 days of receiving a Statutory Demand, your creditor has the right to apply to the court for a Winding-Up Petition. If the court grants a Winding-Up Petition, you will be notified of a court hearing, and after not less than seven days after issue of the Petition, notice of the Petition will be published in The London Gazette, for English and Welsh companies. There are several ways to respond to a Winding-Up Petition to resolve the matter before it escalates further.

Court Hearing

If you are unable to satisfy your creditor, you will need to attend a court hearing. At the hearing, a judge will consider evidence and evaluate the viability of your business, the nature of the debt and the likelihood that you will pay it off, to assess whether or not a Winding-Up Order should be made. If you have failed to take any action to resolve the debt, this is much more likely to result in a Winding-Up Order. When you receive a Winding-Up Order, your business will be put into Compulsory Liquidation and forced to close.

Compulsory Liquidation

The court will usually appoint an Official Receiver as Liquidator, unless you have already been working with a private sector Practitioner, and creditors approve of this appointment. The Liquidator will put a notice in The Gazette, inform Companies House of their appointment, and contact creditors to explain how they intend to carry out the Company Liquidation. The primary goal of the Liquidator is to sell off company assets and release funds with which to pay debts to creditors.

Company Closure

When the Liquidator has concluded the process of realising the company’s assets, they will distribute the proceeds as dividends to the business’ creditors. Dividends are paid in priority order, received first by secured creditors, then preferential creditors, unsecured creditors and shareholders. 

At this stage, the Liquidator will produce a final progress report and convene a Meeting of Creditors to present this information. They will also file the report with Companies House, at which point the company will be removed from the Companies House register and will officially cease to exist.

Needless to say, this process can be extremely difficult for company directors, and bring about a long period of emotional and financial turmoil. This is especially frustrating because, in most cases, this can be avoided – business owners have several opportunities during this process to respond and prevent this outcome. If you notice that your business is facing financial troubles, or if you have received a Winding-Up Petition, contact us for expert advice as soon as you can.

  • How Can I Resolve Corporate Debt Problems?

The best way to prevent creditors from taking action against you and trying to shut down your company is to work with them to resolve the debt. This might mean paying the money you owe – and there may be several ways to achieve this – or negotiating new payment terms that can make the debt more manageable. The options we have listed below are among the most important that we would consider in order to help businesses avoid Compulsory Liquidation.

Company Voluntary Arrangement (CVA)

A Company Voluntary Arrangement (CVA) is a payment plan that allows a business to pay off a debt in instalments over a specified period of time. There are several advantages to this approach: your monthly payment amount is based on what your business can realistically afford, and it allows you to maintain a positive relationship with your creditor. A CVA prevents creditors from taking legal action against you, provided you keep to the agreed payment schedule.

To secure this type of arrangement, you must approach your creditors with a proposal that sets out the payment schedule you can afford, and which is reasonable to them. Thanks to our experience, we can examine your company finances and propose a payment schedule that will satisfy all parties, and ensure you have the best chance of success. We will also negotiate with your creditors on your behalf to secure the CVA and support your business to return to solvency.

Time To Pay Arrangement

If your company’s debt is to HMRC, a CVA will not be suitable. Instead, you will need to apply for a Time To Pay Arrangement – although, fortunately, this works in much the same way. With favourable payment terms over a fixed period of time, your business will be in a strong position to recover from debt challenges, and HMRC is typically motivated to support businesses in this position.

However, in order to secure a Time To Pay Arrangement, you must submit a proposal that HMRC will view as fair, and this is why it is important to work with expert advisors in making your application. The team at Company Insolvency Advice has significant experience working with HMRC and supporting businesses to secure Time To Pay Arrangements, and we can help you to calculate a suitable payment schedule that will give you the breathing room you need.

Financing

New investment can help a viable business to return to solvency and quickly pay creditors the money they are owed. Thanks to our experience across a wealth of industries in the UK, we can identify the most suitable ways that your company could raise the funds it needs to pay creditors. We are experienced in advising on asset finance, private investment, crowdfunding, and even cash flow strategies like invoice finance. Any of these solutions could help your business to avoid Compulsory Liquidation and see your business on the road to recovery.

There are many other potential company rescue solutions that might apply in your circumstances, and if you are facing corporate debt or other financial challenges, it is vitally important to contact an expert as soon as possible. To learn which path to recovery is right for your company, call us today on 0800 999 0666 or use our online enquiry form to request a call back at your convenience.

WHO ARE WE

Company Insolvency Advice

Company Insolvency Advice is a leading business rescue, corporate restructuring and insolvency specialists, with years of experience in providing corporate debt solutions. We understand the daily pressure you are under as a director and our team of expert consultants cover the whole of the country in order to discuss debt solutions with company directors.

NATIONWIDE COVERAGE

We cover the whole of the UK

From our office in the North West of England, we provide a national advice service to the whole of England, Scotland and Wales. We aim to offer tailored, high quality service of local business advisors, with the experience, knowledge and support of a huge, national organisation.

OUR EXPERTISE

Why clients choose us

  • Communication

Good communication holds the key to any financial advice for businesses and our remit is to provide clear and accurate debt advice.

  • Experience

Our staff have many years’ experience in dealing with ever-expanding creditor pressure and economic issues that affect companies.

  • Reputation

Company Insolvency Advice prides itself on the reputation it has built up over the years in assisting company directors resolve various financial issues.

“Extremely helpful and very professional service. Knowledgeable and very approachable. Would highly recommend!!”

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