Corporate insolvency for dispute resolution practitioners: compulsory liquidation
Corporate insolvency for dispute resolution practitioners: compulsory liquidation

The following Restructuring & Insolvency guidance note provides comprehensive and up to date legal information covering:

  • Corporate insolvency for dispute resolution practitioners: compulsory liquidation
  • What is compulsory liquidation?
  • The effect of compulsory liquidation on legal proceedings
  • Can a company dispose of assets or continue to trade after presentation of a winding-up petition? (validation orders)
  • How can a company be wound up by the court?
  • Winding-up a company—procedural and practical points
  • Provisional liquidation

This Practice Note contains a summary of the key points relating to compulsory liquidation from the perspective of a dispute resolution practitioner.

What is compulsory liquidation?

Compulsory liquidation is the process of winding up a company by the court, as distinct from a voluntary liquidation (both creditors’ voluntary liquidation and members’ voluntary liquidation) which is commenced by a shareholders’ resolution.

Compulsory liquidation is most frequently used by a company’s creditors, but it is also possible for others to wind companies up, such as the company itself or its members.

For further reading on compulsory liquidation generally, see Practice Note: Liquidation—an introductory guide.

The effect of compulsory liquidation on legal proceedings

Existing proceedings

There is an automatic stay on existing legal proceedings against the company once a winding-up order has been made, or a provisional liquidator appointed—see Practice Note: Compulsory liquidation — Provisional liquidation. This means that no action or proceedings can be commenced or continued against the company without the court's permission. Anyone wishing to lift this stay must apply to the court under section 130(2) of the Insolvency Act 1986 (IA 1986).

Note that, after some uncertainty, the decision of Re Colliers confirmed that retrospective permission may be given, thus avoiding proceedings instituted without prior permission being rendered a nullity. For further reading on this decision, see News Analysis: Retrospective permission