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Compare and contrast compulsory and voluntary liquidation.give practical examples.



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Voluntary liquidation may be initiated by the company itself or its creditors, compulsory liquidation is always led by creditors and is ordered by court. In the process of a voluntary liquidation, management of the company is showing initiative to solve the financial problems and also has more control.

Compulsory liquidation is initiated if previous attempts by creditors to get their monies back have failed. Creditors send a winding up petition to court, and when the petition is approved, the company will be closed down and put into compulsory liquidation.

In the process of a compulsory liquidation, there is no option to buy back the assets of the company, while in a creditors voluntary liquidation the opposite may be the case.

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