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Under the terms of a compulsory liquidation the assets of a company are sold with all revenue raised being shared among the company's creditors.
Compulsory liquidation can only be reached through a court order and once the process is complete the company is dissolved. Most companies that face compulsory liquidation do so because they are insolvent and because one or more creditors have issued a winding up petition.
Once the winding up petition has been successful an insolvency practitioner is appointed to act as liquidator – at this point it becomes illegal for the company to continue to trade in any way; the liquidator takes complete control of the business and its assets and is charged with acting in the best interests of its creditors.
The role of the liquidator
A liquidator is an officer of the court and should act impartially at all times. Creditors should provide the liquidator with "proof of debt" which the liquidator will then examine before accepting or rejecting the claim.
Liquidators must provide creditors with updates on the progress of the liquidation, while creditors are entitled to form liquidation committees in order to assist the liquidator in achieving its objectives.
Creditors are not always satisfied with the actions of liquidators and in such circumstances may seek to challenge its actions. In some circumstances experienced insolvency solicitors may be able to help a creditor challenge the following:
- Proof of debt decisions
- Liquidator impartiality
- The distribution of assets
- The liquidator's remuneration
Solicitors for compulsory liquidation
Oratto's member insolvency solicitors are highly skilled and experienced in helping businesses deal with the full range of critical financial issues, including compulsory liquidation.
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