Protect your limited company from compulsory liquidation

Last updated: 8 January 2018

Your limited company may be liquidated (wound up) if it can't pay people or organisations (creditors) it owes money to.

Get professional advice from a solicitor or insolvency practitioner.

Your creditors have asked you to pay your debts

When your company owes money the creditors may try to recover the debt by issuing an official request for payment, called a statutory demand.

Issuing a statutory demand

You can find the form for issuing a statutory demand (form SD1) on the GOV.UK website.

Dealing with a statutory demand

You have 21 days to respond to a statutory demand.

Your options are:

Your creditors can apply to the court to have your company wound up if you don't deal with the statutory demand.

Someone has asked a court to wind up your company

Your creditors can apply to a court to close down your company if you don't pay your debt or deal with the request for payment. They do this by making an application called a 'winding-up petition'.

The creditor can withdraw the petition if your company pays the debt or makes an arrangement to pay it.

The court can put the company into provisional liquidation if there's a risk that the company's assets will be removed before the petition can be dealt with. This usually means shutting the company and putting property and assets under the control of a court official.

The court has issued a winding-up order

The court issues a winding-up order if it decides your company can't pay its debts.

You can appeal against a winding-up order, but otherwise:

  • your company's bank account will normally be frozen
  • its assets or property will be sold by the liquidator

If your company (or part of it) isn't bought with the intention of continuing to run the business (as a 'going concern') then any employees will lose their jobs.

You and any other company's directors must co-operate with the insolvency practitioner.

You can be banned from being a director for 2 to 15 years or prosecuted if you've failed to carry out your duties as a director or broken the law.

Read Accountant in Bankruptcy's guide on Debt and the Consequences, which gives information on dealing with creditors and debt.