Compulsory Liquidation
This is an unfortunate turn of events, but one that is necessary as the company is no longer able to operate due to having larger outgoings than incomings, and being unable to actually physically sustain themselves any longer. They will need to stop operating and doing business as soon as they realise they can no longer fund themselves and call a meeting of everyone involved.
Compulsory liquidation occurs when the company cannot actually pay off the money owed to its debtors. A compulsory liquidation can be started by either the company itself; a creditor or several higher up governmental bodies. If there are several directors within a company, then they all have to present a winding up petition together if they want one, to prevent one person being able to suddenly take the business from everyone else. A compulsory liquidation is a court order which will then be issued off the back of this and mean the company has to cease business and liquidate.
The court can appoint a person to liquidate the assets, or else a meeting of creditors can appoint someone to do this job. They will basically oversee the selling and auctioning off of everything the business owns, and make sure the money goes to the correct people.
It can take a lengthy amount of time in order to liquidate a business, but professionals can be hired in order to help. The first lot of money made will cover the liquidation costs, and then from there on the debts will be paid off as fully as possible and a plan devised to make sure this is fairly done.
At the end, the creditors will again call a meeting in order to declare the business officially liquidated. Any profit which may be made, which is unlikely, often ends up going into the state. To finish the whole process, the registrar or court will be sent the full documentation, and the business is no more.
There are many reasons why a court may issue a winding up petition on a business, but the most common is that the company cannot afford to pay off its debts.
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