Compulsory liquidation

The directors or the company (the shareholders) can ask the court to put the company into liquidation. This is known as a compulsory liquidation.

This means the company will stop trading and be ‘wound up’.

You need to show the court that:

• the company cannot pay its debts of £750 or more (it is insolvent)
• the company has passed a special resolution to ask the court to wind up the company

The company or directors must make an application to the court to wind up a company by ‘petition’.

You should seek advice from a solicitor or insolvency practitioner. They'll:

• help you to prepare the right paperwork to support the petition
• tell you which court the petition needs to be sent to
• tell you who can send the petition to the court

If the company’s paid-up share capital is £120,000 or more, the petition must go to the Court of Session.

If the company’s paid-up share capital is under £120,000, the petition:

• should go to the Sheriff Court of the Sheriffdom where the company’s registered office has been for most of the previous 6 months
• could go to the Court of Session

Find a Sheriff Court on the Scottish Courts website.

Appointing a liquidator

If the court accepts your petition, they'll arrange a date for a hearing. The court has discretion in how to deal with the petition. Usually the court requires the applicant  to advertise the petition:

• once in the Edinburgh Gazette
• in one or more newspapers

The petition will also be shown on the walls of the court.

Sheriff Officers will also serve the petition on any parties who the court considers appropriate.

Interested parties have 8 days to lodge (submit) answers to the petition with the court.  

After 8 days, your solicitor will check with the court to see if any answers have been lodged in response to the petition.

If there are no answers lodged, your solicitor will:

• send to the court a proof of the advertisement
• send to the court evidence that sheriff officers served the petition
• ask the court to appoint an interim liquidator

The court will issue the winding up order if they, both:

• are satisfied that the petition was advertised and served as the court instructed
• have received no objections from interested parties

If any party responds opposing the petition to wind up the company, the court may organise a hearing to discuss matters further. The court will then decide whether or not to, both:

• make a winding up order
• appoint a liquidator

Once appointed, the liquidator will take control of the company. Your responsibilities as a director will change.