Business Insolvency

Compulsory Liquidation

A company is usually placed into compulsory liquidation by a creditor who has become fed up with waiting to get paid and has exhausted every other avenue of recovery.

The creditor presents a winding-up petition and, on the making of the winding-up order, the official receiver is usually appointed as liquidator. He will investigate the circumstances of the failure and deal with the assets and liabilities.

What is company liquidation and compulsory liquidation?

What is company liquidation?

Company liquidation is the legal process of closing down a company and selling its assets to pay off its debts. This usually happens when a company can’t pay its bills, or a shareholder decides to shut it down.

During company liquidation, a liquidator is appointed to take control of the company’s assets and distribute them to creditors fairly. Once all debts and liabilities are settled, any remaining funds are distributed to the company’s shareholders.

While this can be a difficult and emotional process, liquidation is often the best option for a company that is struggling to recover from financial difficulties.  

What is compulsory liquidation?

Compulsory liquidation is the legal process where a company is forced to close down and its assets are sold off to pay its debts to creditors. This happens when a company is unable to pay its debts and the creditors petition for the company’s liquidation to the court.

Once a court order has been granted, the company’s affairs are placed under the control of a liquidator who manages the sale of the company’s assets. The profits of this sale are then distributed among the creditors.

Forms of UK liquidation

The type of liquidation process used will depend on your company’s specific circumstances like its financial situation, legal structure, and the preferences of its directors and shareholders. Here are the forms of liquidation that you should know about.

Compulsory liquidation

When a court order is issued to liquidate the company’s assets and pay off its debts when a company can’t pay their bills.

Creditors’ voluntary liquidation (CVL)

CVL is when a company is insolvent, the directors initiate the process of liquidation, and an insolvency practitioner is appointed to liquidate the company to pay off its creditors.

Voluntary liquidation

Voluntary liquidation is when the company initiates the liquidation process and appoints a liquidator to manage the process.

Members' voluntary liquidation (MVL)

MVL when a company is solvent but its shareholders want to close the company down. They can initiate this process and appoint a liquidator to distribute assets to the shareholders.

Provisional liquidation

A provisional liquidation is a temporary liquidation process used to protect a company’s assets until a more permanent solution is found like selling or restructuring the company.

The UK liquidation process

If you’re considering liquidating your company in the UK, there are some steps you should be aware of:

1.  Appointing a liquidator – once the company directors have recognised that the business is in financial difficulty, they can appoint a licensed liquidator who will be responsible for managing the liquidation process.

2. The realisation of assets – the liquidator’s next step is to identify and sell the company’s assets such as property, inventory, machinery or collecting outstanding debts. The profits from the sales are used to pay off the company’s creditors.

3. Payment of creditors – once the assets have been realised, the liquidator is responsible for paying off the company’s creditors as set out in the UK’s Insolvency Act 1986.

4. Distribution of remaining assets – if there are any remaining assets after paying all the creditors, the liquidator will distribute them among the shareholders.

5. Closing the company – once all creditors have been paid and the assets distributed, the liquidator closes the company. The company is then removed from the register and will no longer exist as a legal entity.

It’s important to seek professional advice from a lawyer or insolvency practitioner like Frost Group to ensure that all necessary steps are taken to complete the liquidation process successfully.

What to consider before compulsory liquidation

If a company is struggling financially, it’s important to act fast and communicate with creditors to avoid the winding up petition. Once this has been issued, it becomes more challenging to negotiate with creditors and the company may have to pay additional costs for legal representation.

Negotiating can involve presenting a proposal for repayment which may include extending the repayment period, reducing interest rates, or writing off a portion of the debt. It’s also important to review the company’s financial position to determine if compulsory liquidation is the best option.

If you have received a winding-up petition

Frost Group are experts in turning around troubled businesses and are here to help you take back control.

We will talk you through all your options and apply for a validation order to unfreeze your bank account or wind up your business on your terms with a voluntary liquidation.

Whatever you decide to do, we will make the whole process as stress-free as possible, and you are assured of professional service and expert advice.

Acting on behalf of creditors

We give free and impartial advice and our Insolvency Practitioners often act as liquidators on behalf of creditors in Croydon, London and Bournemouth.

Why choose Frost Group

We will fully explain the range of possible options and recommend which we think is right for everyone concerned, and why.

Our nationwide company Liquidation service operates from our offices in Bromley, Leicestershire, London and Croydon. If you need a speedy and cost-effective Liquidation and are close to one of our offices, we can arrange for an Insolvency Practitioner to see you within the hour. We are of course, always available for phone calls, Zoom, Facetime, WhatsApp or Teams meetings.

Both Jeremy Frost, Michelle Breslin and Patrick Wadsted can act as liquidators to liquidate your limited company quickly and professionally. This will stop creditor calls and help you, as directors, to start to plan and live your life again.

Using our expertise, we will help secure the best out come for creditors and stakeholders, and we can continue to advise after the liquidation, including advice on new business ventures.

If you think liquidation may be right for your company, speak with one of our licensed Insolvency Practitioners by phoning 0345 2600101 for advice that is free and confidential (or 07714 099691 out of hours).

Compulsory Liquidation


CVL Bronze

Qualifying criteria:

  • No more than 2 directors
    and 2 shareholders

  • No ROT

  • No employees

  • No assets

  • No finance agreements

  • No pensions

  • No overdrawn directors loans 

  • Up to 10 creditors

Prices start from:


Plus disbursements and VAT

CVL Silver

Qualifying criteria:

  • Assets over £5,000

  • Yes to finance agreements
    and warranties

  • Yes to pensions 

  • Yes to employees

  • Yes to creditors 

Prices start from:


Plus disbursements and VAT

CVL Gold

Qualifying criteria:

  • Fixed Assets including
    property and lease

  • Large creditor claims

  • Complex creditor claims

  • Pending litigation

  • Shareholder and
    director disputes

  • Bespoke advice

Prices start from:


Plus disbursements and VAT

Contact an expert for professional help and advice

Our team member below will be able to help with all your questions

Jeremy Frost

CEDR Accredited Mediator & Licensed Insolvency Practitioner

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Frequently Asked Questions

What happens to a company’s assets during compulsory liquidation?
The company’s assets are sold off by a liquidator who is appointed to manage the sale of the company’s assets. The proceedings are distributed among the creditors.

Can a company continue trading during compulsory liquidation?
No, once a company is in liquidation, the company must cease trading immediately.

Can a company be forced into compulsory liquidation without a winding-up order?
No. A company can’t be forced into compulsory liquidation without one or more creditors issuing a winding-up petition.

Can I liquidate a company myself?
No, the liquidation process can only be issued by its shareholders and a liquidator must be appointed as an authorised insolvency practitioner.

Can I reuse the company name after insolvency?
You can apply to the court within seven days of liquidation to ask permission to re-use a prohibited name or similar name within 5 years following the date of liquidation.

What is wrongful trading?
Wrongful trading is a term used to describe when a company keeps on trading even though they should know that the company has no chance of avoiding being liquidated or put into administration due to financial struggle. It’s usually a director’s job to ensure the company is successful for its shareholders, but when it becomes clear that the company is insolvent, it’s the director’s primary duty to protect the people and companies the company owes money to.

What is an HMRC personal liability notice?
A personal liability notice is issued by the HMRC to the director of a company that owes money to them. The notice warns the directors that they may be held liable for the company’s debt to HMRC if they don’t pay within a specified period.

Do I have to attend the creditor's meeting?
In most cases, it's not necessary to attend the creditor's meeting. However, you may be required to attend the meeting if you’re summoned to do so by the liquidator. You should always seek professional advice before deciding whether to attend.

How long does it take to liquidate a company?
This depends on a variety of factors such as the complexity of the company’s affairs, the size of its assets and liabilities and the number of creditors involved. Generally, it can take several months to a year or more to complete.

Operating nationwide throughout the UK

At Frost Group, we want to make things as easy as possible for you. That is why, if you can’t come to us, we’ll come to you. We operate face to face, nationwide meetings, wherever is most convenient for you.

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