Compulsory liquidation

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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 voluntary liquidation (both creditors’ voluntary liquidation (CVL) and members’ voluntary liquidation).

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

By a company’s creditors

A winding-up petition is most commonly issued by a creditor who is owed money and is unable to recover it through the usual debt recovery methods. A creditor 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, or

  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 the section 123 of the Insolvency Act 1986 ( To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

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