If you run your own business then it is advisable that you become acquainted with the process of liquidation. Liquidation is a commonly used method to dissolve a company amicably during a crisis or downfall. In this process, the assets of the company are sold off to pay off any pending debts. Compulsory liquidation is an important part of the liquidation process.
Compulsory liquidation
As the name suggests, this liquidation process is related to the compulsory liquidation of any organisation which cannot resolve its pending debts. Therefore, a petition can be lodged for compulsory liquidation. This type of petition is usually lodged by the main company or a creditor.
The following are some of the situations in which a petition for compulsory liquidation is filed.
Compulsory liquidation is filed whenever the company cannot achieve the set targets before the stipulated time period. In addition, the concerned members might also file for liquidation when the total number of members does not meet the limit specified by the statute. However, debt related issues are the major reason for filing a petition for compulsory liquidation. This particular liquidation is usually caused by a major financial crisis. Sometimes, it is also beneficial to wind up a company if it has reached maturity.
The final verdict
After filing for compulsory liquidation, the court decides whether to pass the verdict to wind up the organisation. During this procedure, the court will appoint liquidators to follow up the winding up process.