Insolvency matters and environmental issues—compulsory liquidation
Insolvency matters and environmental issues—compulsory liquidation

The following Environment guidance note provides comprehensive and up to date legal information covering:

  • Insolvency matters and environmental issues—compulsory liquidation
  • 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

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) 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 to pay its debts as and when they fall due, or that the company is balance sheet insolvent—as per the definition of insolvency under section 123 of the Insolvency Act 1986 (IA 1986)

The statutory demand

A statutory demand is a written demand in a prescribed form for a debt in excess of £750 that is served on the company and gives the company time to respond. For more detailed information