Compulsory liquidation
Compulsory liquidation is when a court orders a company to be wound up, usually after a creditor presents a winding-up petition because a debt has not been paid (the company or its directors can also present one). HMRC is one of the most active petitioners. The court appoints the Official Receiver and trading stops. If you act before the hearing you often still have alternatives. After a winding-up order is made, those options largely disappear, so the days before the hearing matter enormously. Insolvency Act 1986, s127; gov.uk
- How it starts
- A creditor presents a winding-up petition at court
- Frequent petitioner
- HMRC, for unpaid VAT, PAYE or Corporation Tax
- Bank accounts
- Usually frozen once the petition is advertised
- Who is appointed
- The Official Receiver, who can stay as liquidator, or an Insolvency Practitioner appointed by the Secretary of State or by a creditors' decision
- Your window
- The period before the hearing, when options still exist
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The winding-up petition timeline
Knowing where you are on it tells you how urgently to act.
- Statutory demand21 days to pay (debt over £750)
- Petition servedDay 0
- Advertised in The GazetteNo sooner than 7 business days after service
- Bank account frozenUsually after the advert (s127 risk starts at presentation)
- Court hearingDate fixed by the court when the petition is filed
Indicative statutory timing; your exact dates depend on the court and creditor.
Sources: the £750 debt and 21 days, Insolvency Act 1986 s123; advertisement no sooner than 7 business days after service, Insolvency Rules 2016 r7.10; payments after presentation void unless validated, s127; hearing date fixed by the court when the petition is filed, r7.7.
The timeline you are working against
A petition is served, then advertised in The Gazette no earlier than seven business days later (Insolvency Rules 2016 r7.10), then heard at court. Once a petition is presented, section 127 of the Insolvency Act can make any payments out of the company void, which is why banks routinely freeze the company accounts as soon as the petition is advertised. Our winding-up petition timeline tool maps the key dates, including when your bank is likely to freeze the account. Acting in the gap between service and advertisement is usually the difference between keeping control and losing it.
What you can still do before the hearing
Depending on the facts you may be able to pay or settle the debt, genuinely dispute it, apply to adjourn, agree an arrangement with HMRC (usually only accepted where the debt can be paid in full straight away), or move to a controlled, director-led CVL or administration. Each has strict timing, so speak to a Licensed Insolvency Practitioner as soon as you know a petition is coming or has been issued.
Related data
Our winding-up petition tracker: Recent winding-up petitions published in The Gazette, the step before compulsory liquidation. Every page on our data hub names its official source.
Where to go from here
- Use the matching template: Winding-up petition response checklist.
- If you decide to speak to a Licensed Insolvency Practitioner, choose your own: our practitioner directory lists every practitioner on the official Insolvency Service register, and how to choose an insolvency practitioner explains what to ask. Always confirm their entry on the official register before you instruct anyone.
Common questions
Why has my company bank account been frozen?
Because a winding-up petition has probably been advertised. Under section 127 of the Insolvency Act 1986, in a winding up by the court any disposition of the company's property made after the commencement of the winding up is void unless the court orders otherwise, and if an order is made the winding up is treated as starting when the petition was presented (section 129(2)). Banks freeze accounts to protect themselves. A practitioner can sometimes obtain a validation order for essential payments, but these are hard to obtain and the court must be able to see that continuing to trade benefits creditors.
Can I stop a winding-up petition?
Sometimes, if you pay or properly dispute the debt, or reach agreement with the creditor, before the hearing. The earlier you act the more chance you have. After the order is made it is very hard to reverse.
What happens to me as a director afterwards?
The Official Receiver investigates the company and director conduct. You are not automatically personally liable, which is another reason to take advice early and keep good records.
What happens when a company goes into compulsory liquidation?
The court makes a winding-up order, trading stops and the Official Receiver takes control. Company assets are sold and the proceeds are paid to creditors in the legal order of priority. Employees are automatically dismissed when the order is made and can claim from the Redundancy Payments Service, and the company is eventually dissolved.
How long does compulsory liquidation take?
The winding-up order is made at the hearing, but fully closing the case, selling assets and distributing funds can take from several months to a couple of years, depending on the assets, claims and any investigation into director conduct.
How much does compulsory liquidation cost the director?
The process is paid for from company assets and the court fees are met from the petition, so there is usually no direct fee for the director to pay. The real cost is loss of control: a director-led CVL lets you choose the timing and the practitioner instead.