Protect your limited company from compulsory liquidation

Business: Selling Closing

    Your limited company may be liquidated if it can’’t pay its creditors – but a creditor has to follow specific steps before this can happen.

    Statutory demand

    The first step creditors will take is to give your company a statutory demand. They or their representative will usually give it to you personally.

    Your company will have 21 days to pay the debt or agree a payment schedule with them.

    If you can’t pay or reach an agreement, you can try to stop the creditors taking the next step by:

    • applying for a Company Voluntary Arrangement
    • apply to a court to stop the process

    You can get advice from a solicitor specialising in company law from the Law Society, or the Law Society of Scotland.

    If your company is wound up by the court

    Applying for a winding up order will be your creditors’ next step. They must apply to a court for this by issuing a winding up petition.

    If your company pays the debt or comes to an arrangement with the creditor to pay it then the creditor can withdraw the winding up petition.

    If the debt is not paid the court will hear the petition and may make a winding-up order against your company.

    If the court makes a winding – up order, your company’’s bank account will normally be frozen. Your company won’’t be allowed to sell any assets or property.

    Compulsory liquidation

    When a liquidator is appointed, they will take control of the company and sell its assets.

    As a director:

    • your employment ends and you’’re told how to claim for any unpaid wages
    • you’re not entitled to act for or on behalf of the business
    • you must help the liquidator, eg by attending an interview to find out why the business closed

    You can be banned from being a director for 2 to 15 years or prosecuted if the liquidator decides your conduct was unfit.

    Defend your company against a statutory demand or a winding up petition – disputing the debt, getting an injunction and challenging the petition in court