A Compulsory Liquidation is ordered by the court, following a petition by creditors, the directors, the company itself, or a shareholder.
The case is first referred to the Official Receiver (a civil servant and officer of the court), who decides whether the assets of the company are likely to cover administrative costs. If they are, the Official Receiver will call a creditors’ meeting to appoint a Liquidator; if not, the case will be handled by the Official Receiver. In a Compulsory Liquidation, the conduct of the company's directors will be investigated as part of the procedure, by the Official Receiver.
One of the most common grounds for a company being wound up by the court (and therefore entering Compulsory Liquidation) is that it is unable to pay its debts as they fall due.
Once the Order has been made by the court, the Official Receiver has a duty to investigate the causes of the business failure and the promotion, formation, business dealings and affairs of the company.
During these investigations the Official Receiver will:
- carry out an inspection of the company's premises, if necessary;
- take custody of any books and records;
- call all the directors for an interview.
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