Compulsory Liquidation v Voluntary Liquidation – what’s the difference?

It’s important you understand the difference between the 2 if you’re looking at closing your company. Both result in the closure of your company but can have very different outcomes for the directors.

Compulsory Liquidation

compulsory liquidation is when one of your creditors forces the company into liquidation, usually after a winding up petition is issued. The official receiver is appointed, and they conduct a thorough investigation into the conduct of the director. If you have continued to trade after becoming aware of the company’s financial problems, you could be made liable for company debts from that point!

Voluntary Liquidation

A voluntary liquidation is where you appoint an insolvency practitioner to close the company down. This is called a creditors voluntary liquidation. You can agree to buy back company assets, start a business again in the same industry and ensure your employees receive their redundancy pay quickly.

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