Compulsory Liquidation Of The Company

CHERYL BELL

Compulsory liquidation generally occurs when a company is wound up by an order of the High Court. A compulsory liquidation is also known as court liquidation in many regions because the resolution is passed from the court. A winding-up petition is presented in the High Court, usually by a creditor with the statement stating that the company owes a certain amount of money and the company is unable to pay that amount in a certain interval of time. A winding-up order can still be made even if the company has left with no assets or disputes the amount claimed. Any controversial debts should be resolved with the creditor before the winding up order is made because once the order is made the effect of the law against compulsory liquidation is much severe as that of other law.

The Official Receiver who is a civil servant and an officer of the High Court is handling the early stage of the Compulsory liquidation. The OR will inform the company’s creditors and shareholders that the company is being wound up.  If there are any significant assets, then an insolvency practitioner may be appointed as a post of liquidator in the place of Official Receivers either by creditors or shareholders or by the Department of Enterprises.

 The role of the liquidator is to realise the company’s assets, recompense the charges and charges which are rising from the liquidation and share out any remaining assets to the creditors and shareholders. Whenever a compulsory liquidation for winding up is made by the order of the court then the OR will be notified by the court, which will send notice to the Director of the company. Sometimes the OR will need to interview the Director of the company at once for further investigation of the company. The interview happens only in one condition if there are urgent matters to be dealt with relating to the company’s business, employees or any assets.

The winding up order proceedings can be stopped if:

The court can cancel a winding up order, if the company had applied for the stay order and during that interval of time if the court did not have all the appropriate facts during the creation of winding up order then in that case the winding up order can be discarded by the court. If the company is in a position to take some instant action, then the company should seek some advice from the professional advisor within the limited interval of time given by the court. The company can seek this advice either from the lawyer, or from a qualified accountant or either from an authorized liquidation practitioner. The company should also inform the OR and must continue to co-operate with the OR in the meantime. 

Once the winding up process is complete, the company will cease to exist. On release, the OR/IP sends a notice to the Registrar of the Company and the company will get dissolved three months later. 

If there are some debts which are to be paid to the employees then they must consult the OR before the winding up process because once the completion of winding up process is done the company will remain with nothing. And once the company is ceased they will be no longer its employees.
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