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What Is the Procedure for Compulsory Liquidation?

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Before even thinking about the compulsory liquidation procedure it is imperative to understand exactly what that means. In effect, compulsory liquidation is brought about when either creditors or the government requests a company to be liquidated. Most often creditors seek to bankrupt a company while the government could be seeking liquidation for other reasons besides unpaid taxes. For example, if it has been determined that a company has been carrying out fraudulent activities, the court may compel the business to cease operations immediately and then set about seeking compulsory liquidation to compensate those damaged as a result of criminal activities as well as fines and punitive damages due the government.

The compulsory liquidation process begins with either the creditors or the government seeking a court order to liquidate the company in question. In fact, this is the only way in which a creditor can bring about bankrupting (liquidating) a company. It should be said however that a company might have been able to avoid compulsory liquidation brought about by creditors if it had acted quickly and in good faith to seek voluntary arrangements to pay debts in full within a stated timeframe. Even so, if those debts aren't satisfied the creditors still have the legal right to file a petition for compulsory bankruptcy with the court.

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What is compulsory liquidation then? It is something that is not easy to avoid once court proceedings have commenced and the only way to avoid it would be if the creditors were amenable during the proceedings to ask for a stay of the order to allow the company time to restructure and pay debts. Rescue efforts in the UK have come a long way in recent years and if you feel that your business is in jeopardy of being forced into bankruptcy, contact a debt rescue company to begin negotiations for you before the matter is out of your hands.


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