Compulsory liquidation
A court-led winding-up process
Compulsory liquidation is liquidation following a court order. It often arises after a creditor petitions to wind up a company over unpaid debt. A petition is a serious step, but it is not itself the same as a winding-up order.
The applicable procedure depends on jurisdiction. Provide the full court documents, company registration details and dates when requesting advice.
Act on the actual document
Record the hearing date, service details and any planned advertisement. Explain whether the debt is admitted or disputed and whether funds are available. A genuine dispute may need urgent legal advice as well as an insolvency review.
Do not assume paying one creditor or opening negotiations automatically ends proceedings. Court costs, other creditors and formal procedural requirements may still matter.
If an order has been made
Control of the company’s affairs changes and directors must cooperate with the relevant office-holder. Company books, assets and information need to be made available. Staff, customers and trading commitments may be affected.
Seek advice before dealing with company property or continuing transactions. The financial and legal consequences depend on the stage reached and the particular facts.
What happens between a petition and a winding-up order?
A creditor may seek a winding-up order over unpaid debt. The petition, its service, any advertisement and the hearing are separate stages. If the company disputes the debt, it needs prompt legal advice supported by contracts, correspondence and evidence of the dispute.
Where the debt is admitted, explain available funds and whether a realistic proposal exists. A conversation with the creditor is not confirmation that the hearing has been cancelled. Read our winding-up petition guide for help identifying the immediate problem.
What does the Official Receiver do?
In England and Wales, the Official Receiver normally becomes liquidator when the order is made, unless the court has appointed another liquidator. An insolvency practitioner may subsequently take over asset administration. The Official Receiver also considers the causes of failure and directors’ conduct.
Directors must cooperate, supply records and explain the company’s transactions. Prepare access to accounting systems, bank records, asset information and business correspondence. Keep an accurate record of what has been handed over and promptly identify documents held by an accountant or former employee. Scotland and Northern Ireland have different procedural arrangements.
What happens to staff, creditors and the bank account?
The company’s ordinary trading operations will generally stop, and employment may end. Eligible employees may have claims under the government insolvency payments scheme. Creditors should follow the office-holder’s instructions for submitting claims rather than seek informal payment from directors.
A bank may restrict the company account when it learns of a petition. Transactions after presentation of a petition can carry serious consequences if a winding-up order follows. Seek urgent advice before moving money or assets; opening another account does not resolve that issue. See our frozen bank account guide.
What should you prepare for an urgent discussion?
Have the petition or order, hearing details, creditor correspondence, bank position and current accounts ready. Explain any pending wages, customer deposits or perishable stock. These details help establish what needs immediate attention.
If the order has already been made, tell the adviser its exact date and the reason you believe it should be challenged. Legal remedies depend on grounds and strict procedural requirements. Do not continue operating on the assumption that an application will succeed.
On this page
- A court-led winding-up process
- Act on the actual document
- If an order has been made
- What happens between a petition and a winding-up order?
- What does the Official Receiver do?
- What happens to staff, creditors and the bank account?
- What should you prepare for an urgent discussion?
- Common questions
- Speak to our team
Need help now?
If a deadline is approaching, tell us the date when you call.
Common questions
No. They are different documents with different consequences. Identify exactly what has been received and its deadline.
No. Negotiations do not automatically remove court deadlines or prevent further steps.
There may be legal routes in particular circumstances, but deadlines and grounds require urgent specialist legal assessment. No outcome can be promised.
No, not automatically. The company and director are separate, but personal guarantees, loan-account debts or claims arising from conduct can create personal exposure.
Yes. Stopping trade does not dispose of court proceedings or remove duties to preserve records and cooperate. Obtain advice on the papers and deadlines.
Sources: Official guidance 1 · Official guidance 2.
Updated 1 November 2026. General guidance, with procedural detail focused on England and Wales. Requirements can differ in Scotland and Northern Ireland.