What is the difference between compulsory and voluntary liquidation?
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Compulsory liquidation occurs when a company cannot afford to pay its debts and a creditor or multiple creditors take legal action in pursuit of the money owed.
Voluntary liquidation generally happens under very similar circumstances with the key distinction being that an insolvent company’s directors decide to take their business into liquidation before the point at which they are forced to do so by creditors.
In both cases, liquidation is a consequence of being insolvent and having no realistic prospect of a viable business going forward – thus ruling out other formal insolvency procedures such as administration.
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▶The main difference between compulsory and voluntary liquidation is Wether or not the process was the direction's idea.There are differences between a compulsory liquidation and voluntary liquidation. ✔
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