Compulsory liquidation—basic insolvency principles
Compulsory liquidation—basic insolvency principles

The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:

  • Compulsory liquidation—basic insolvency principles
  • The circumstances in which a company can be wound up by the court
  • Winding up a company—the procedure
  • Consequences of winding-up on the company
  • Validation orders
  • Provisional Liquidators
  • E-filing at the Rolls Building

On 6 April 2017 the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024 replaced the Insolvency Rules 1986 (IR 1986), SI 1986/1925.

For a summary of the changes to winding up, see Practice Note: The Insolvency (England and Wales) Rules 2016—Part 7: Compulsory liquidation [Archived].

Compulsory liquidation is the process of winding up a company by the court. It is most frequently used by a company's creditors, but it is possible for others, such as the company itself, or members to also use this process. It is an alternative to company voluntary liquidation.

The circumstances in which a company can be wound up by the court

By its creditors

A petition for winding-up is most commonly issued by a creditor who is owed money (at least £750—this figure is not affected by the increase in the bankruptcy level for bankruptcy petitions from £750 to £5,000 that came into effect on 1 October 2015) and is unable to recover it through the usual debt recovery methods. They may issue a petition on the following grounds:

  1. they have served a statutory demand and the 21-day period for payment/response has expired

  2. they have an enforcement or execution process following a judgment, which is unsatisfied, either in full or in part

  3. they are able to prove to the court that the company is unable