Compulsory Liquidation is as a result of a court order that follows a Winding Up Petition issued by a creditor. This is a formal legal procedure taken against a company as it means that the company has failed to meet its liabilities despite being asked to do so.

As a result, the creditor in question can serve a Winding Up Petition against the company. It is likely that the outstanding liability has been chased for payment on a number of occasions and it is likely that this is a last resort for the creditor demanding payment due to the costs in issuing a Winding Up Petition.


A creditor can apply to the Court to ‘wind up’ a company if it cannot pay its debts. In order to wind up a company the creditor must:

  • Be owed £750 or more
  • Be able to prove that the company cannot pay you

In order to do this, an application will need to be made to the Court.

Creditors will need to provide documentation that the company owes it money, for example following the issue of a Statutory Demand or a Court Judgement.

Creditors may want to get legal assistance from a solicitor with regards to the issuing of a Winding Up Petition so that the petition is correctly issued and served.

The creditor will need to pay the Winding Up Petition Fee and the deposit at the same time.

After a date has been set for the hearing of the Winding Up Petition, the petition is served at the company’s registered office or by hand to an officer of the company.


There are various ways of dealing with a Winding Up Petition, which are:

If you have appropriate funds available, one option is to pay the outstanding debt in full.

Agree a payment plan with the creditor. Please note that this may not be accepted by the creditor however due to the costs involved in issuing a Winding Up Petition, it may be something that the creditor may consider.

Dispute the debt if you disagree that the money is owed however in order to do this, you will need to have substantial evidence that the debt is disputed / not owed. If this is the avenue that you feel you need to take then you will need to seek professional legal advice in relation to this as once the petition has been advertised in the London Gazette, the company’s bank account will be frozen.

Request an adjournment. If you feel that you need more time to pay the outstanding debt then it is possible that you can request an adjournment for the hearing to take place. However, you must have a valid reason to request an adjournment and are better to seek professional legal help to assist with this. There is no guarantee the court will agree to an adjournment.

Take Professional Insolvency Advice. A Licensed Insolvency Practitioner will be able to advise you whether it would be possible for the company to seek a Company Voluntary Arrangement (“CVA”) with its creditors or whether placing the company in Creditors Voluntary Liquidation (“CVL”) would be a more suitable option.


If none of the options above are taken or if you do nothing, then the hearing will take place at Court.  At the hearing, the judge will look at both parties evidence and will grant a Winding Up Order if he / she believes that the company is insolvent and unable to pay its debts.

If you do not attend or defend a Winding Up Petition a Winding up Order will be made and the matter passed to the Official Receiver.

Please note that if your company receives a Winding Up Petition then you should act immediately and take professional advice from a Licensed Insolvency Practitioner before it gets too late.


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