Compulsory Liquidation
When a creditor has exhausted all avenues to recover a debt, he/she will appoint a solicitor or debt collector to collect the debt. The debt must be over £750 and undisputed with the creditor having notified the debtor of intent to collect. If the debtor fails to pay the statutory demand within 21 days and does not dispute the debt, the creditor may then issue a winding-up petition.
The application for a petition will be granted where it can be proven to the court’s satisfaction that the debt is undisputed, attempts to recover have been undertaken and the debtor remains non-compliant. A petition will be issued and a court hearing date granted. Once the petition is served on the company, it is given a period to pay the debt or to defend the action. As the action is channelled through the High Court, a barrister will be required to defend. If the case is found, the company is wound-up by the court.
The petition is advertised in the London Gazette whereupon banks will monitor the situation carefully. Accounts will be frozen immediately and all trading will cease ensuring that assets cannot be sold.
Compulsory liquidations are most often utilised by the Crown Services.
REMEMBER:
Under the Company Directors Disqualification Act 1986 you could be banned as a director for up to 15 years. You could face criminal proceedings under the Social Security and Administration Act 1992 and the Criminal Justice Act 1988.
Under the Income Tax (Employment) Regulations 1993, the Revenue is entitled to recover unpaid PAYE from directors where wilful failure is proven.
It is essential that all responsible steps be taken to protect assets, to conform to the liquidator’s wishes and act responsibly.