What are the risks of compulsory liquidation for directors?

Compulsory liquidation can have serious consequences for directors. Because the process is court-ordered following a creditor petition, directors lose all control immediately. The Official Receiver will investigate their conduct in the period leading up to insolvency, including whether they traded wrongfully, preferred certain creditors, or misused company funds. If misconduct is found, directors risk disqualification for up to 15 years or being made personally liable for company debts. The public nature of compulsory liquidation can also damage personal and professional reputations. Furthermore, directors cannot choose the liquidator, unlike in a CVL, so they have less influence over the process. For directors with overdrawn loan accounts or personal guarantees, compulsory liquidation may also trigger immediate personal financial consequences. Overall, compulsory liquidation is more damaging than voluntary liquidation because it suggests that directors failed to act responsibly before matters reached court.