Compulsory liquidation also known as ‘winding up’ a company, allows the court to close the company if it cannot pay the debts it owes. This process is usually a last resort to get paid by either forcing the company to act or gaining access to the companies assets.
To proceed with compulsory liquidation you must be owed a minimum of £750 and have waited at least 21 days to have been paid (serve a statutory demand).
The procedure starts by presenting a petition (application) at court, this is when the judge will decide if it is appropriate to make a winding up order. I this is successful, the companies assets are sold and you and any other creditors are paid.
When the company goes into liquidation all its assets are sold in order to pay all its creditors. Unsecured creditors rarely redeem all the money owed to them as they lie at the bottom of the payment hierarchy. So unfortunately it is not guaranteed you will be paid all or any of the money you are owed.
Bankruptcy. If you want to bankrupt an individual or company you need to present a bankruptcy petition to a court to prove they owe you more than £5000. The debtor must also serve a 21 day statutory demand. The application to the court will result in the companies assets to be taken and sold to pay their debts.
Once the bankruptcy is made, an official receiver takes control of the individual/company assets and decides whether the debtor has sufficient funds to repay creditors through monthly payments. The repayment process takes place in a strict order of priority. Creditors will make their claim for repayment using a ‘proof of debt’ form. Unsecured creditors rarely receive payment as they are at the bottom of the payment hierarchy.
Debt recovery agency. If you’d prefer to stay out of court, you can contact a debt recovery agency and ask them to work on your behalf. There will either be a fixed fee for the work they carry out, or they will take a cut of any money which they recover from the client on your behalf. This option means that you can continue running your business without using your valuable time trying to recover the debt personally.