Yes, a limited company can be forced into compulsory liquidation by the court. This can happen for a variety of reasons, but it’s usually because a creditor or a regulatory body, such as Companies House or the Financial Conduct Authority (FCA), petitions to the court for a winding up order on the grounds that the company is unable to pay its debts. In such instances, a company is considered insolvent.
A company will be viewed as unable to pay its debts in the following circumstances:
A creditor is owed more than £750.
A creditor presents a written demand in the prescribed form (i.e. a statutory demand) to the company.
The company fails to pay, secure or agree a settlement of the debt to the creditor’s reasonable satisfaction.
If your company is experiencing severe financial difficulty and there is a real risk of insolvency, you should address the situation immediately. Consult an accountant or professional advisor and contact your creditors to keep them abreast of your situation. You may be able to come to some kind of voluntary arrangement with them.
You can find out more about liquidation and insolvency here.