Compulsory liquidation
When a court orders a company to be closed, usually because a creditor has asked it to. We help companies and directors in Leeds, Sheffield, Bradford and across Yorkshire and the UK.
Please note: this page is a brief, general overview to help you understand your options. It doesn’t cover every detail or every possible route, and it isn’t legal or financial advice. Every situation is different, so please talk to us before making any decisions.
In short: when a court orders a company to be closed, usually because a creditor has asked it to.
A creditor who hasn’t been paid can ask the court to close the company by issuing a winding-up petition. If the court agrees, it makes a winding-up order. A government official called the Official Receiver then takes control, sells the company’s assets and pays creditors as far as possible. Sometimes a licensed insolvency practitioner is appointed as liquidator instead.
What happens
- A creditor issues a winding-up petition, and it is advertised publicly.
- The court hears the petition and decides whether to make a winding-up order.
- If it does, the Official Receiver or a liquidator takes control of the company.
- The company’s assets are sold, creditors are paid as far as possible, and the company is closed.
Things to know
- If you receive a winding-up petition, act straight away. There may still be ways to avoid a winding-up order, but time is short.
- Once the petition is advertised, the company’s bank will usually freeze its accounts, which can stop the business trading.
- If the debt is genuinely disputed, the petition may be challenged in court. You’ll need a solicitor for this.
- Directors can also ask the court to close a company, for example if the shareholders won’t agree to a voluntary liquidation.
Other options
Compulsory liquidation isn’t right for everyone. These are the other corporate insolvency options, or you can compare them all.
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