The Process for Compulsory Liquidations
By Clifford Woods
Compulsory liquidation is a process that must be done when a company is being closed down due to bankruptcy.
Bankruptcy of a business is usually demonstrated by the failure of a company to pay for people and organizations that the business is in debt to.Compulsory liquidation, also referred to as a "winding up," is generally guided by a lender who is buying the business for money. The very first official step of a compulsory liquidation is the introduction of a winding up case by a dis-satisfied creditor.
About the Official Receiver: An official receiver, abbreviated to OR, deals with the initial phases of the compulsory liquidation. As a representative of the business, you need to know its budget and whether or not any lenders are pushing for payment by court notices or letters. These types of request may result in a petition to liquidate the business.
Whenever a liquidation request is carried out, the court will inform the OR, who is going to then send out notice of the payment request to the company directors. In some instances, the OR will have to interview you at least one time.
Termination of Company Director: During the liquidation process you will not have any say in the company when it comes to purchases, property, and resources. All of your abilities as a company director would be no more and you are no longer considered a representative of the company.
This also means that you, as the company director, would not take part in the matters of the business on a daily basis anymore. On the other hand, your tasks and obligations as a company director will still be in effect.
You might, for example, be asked to support the official receiver in getting rid of the company's assets.
For anyone who is a worker of the business, you will be laid off as soon as the liquidation process begins. The exact details are different for every business, so you will be informed by the OR about how exactly to claim for any uncompensated income or various other monies due to you as a worker.
You should never use any of the business' resources to make repayments to lenders or for your own personal use and advantage.
Working with the Official Receiver: It is important that you provide all of the details about the company and work together with the OR. If you do not cooperate with the OR, then you may have to appear in court to provide the details they need. If you make it an easy time for the OR, then you will be able to liquidate without any problems and start fresh the next time around.
Also, if you avoid a court order, there will be a warrant out for your arrest, which of course is horrible for publicity. Needless to say, how you work with the OR decides if you are able to act as the company director until the end.
Paying Off Company Debts: You might be instructed to make contributions to the business' resources if you did not use the company funds properly or if your business has dealt fraudulently. For anyone who is a shareholder of the business, you could be requested to make a payment for any shares which have not been completely paid for.
In the event that you, or anyone else, have secured any of the business' debts, this means you have consented to pay for the debt if the business is unable to. Whenever a lender becomes aware of the liquidation, you might be requested to make total payment depending on the conditions you agreed with when you became a shareholder.
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