ABSTRACT
The kind of liquidation we describe in Chapter 10 is a solvent liquidation. The kind we cover in this chapter is an insolvent liquidation.
There are two types of insolvent liquidation, which can be characterised as the one where you jump and the other where you are pushed. The first is a creditors’ voluntary liquidation where the directors believe the company should go into liquidation because it is unable to meet its debts and the shareholders agree to place the company into liquidation. The second is a compulsory liquidation. This usually happens when a creditor who: ❍ has not succeeded in getting their money by other
means; and ❍ is owed more than £750; and ❍ can prove the company is insolvent (this is
normally done by having issued a statutory demand which is unsatisfied),
then petitions the court to wind up the company. Unless the company can show that it is not insolvent, the court will generally make a winding up order and the company goes into compulsory liquidation (ie, winding up by the court).
