21 - Liquidation

Question 1

On what conditions can a creditor apply to a court to have a company wound up?

Answer 1

If they are owed at least £750 and have not received payment within 21 days of written demand for debt

Question 2

When a court issues an order in favour of compulsory liquidation of a company, when is the official commencement date?

Answer 2

The date the liquidation petition was presented to the court

Question 3

What is the order in which assets are distributed in liquidation?

Answer 3

• Fixed charge holders
• Cost of liquidation
• Preferential creditors (unpaid wages)
• Secondary preferential creditors (HMRC)
• Floating charge holders
• Unsecured ordinary creditors
• Holder of deferred debts (unpaid but declared dividends)
• Shareholders

Question 4

What does it mean for a liquidator to “avoid preference”?

Answer 4

Avoid doing anything to put a creditor in a better position they would have been in an insolvent liquidation by making payments that have already been made by a director before or during insolvency procedures