What type of liquidation is initiated by a court based on statutory grounds such as inability to pay debts?

Compulsory liquidation is a process initiated by a court order when a company is unable to pay its debts and meets certain statutory criteria. This legal action allows creditors to recover their claims by liquidating the company's assets. The court essentially steps in to protect the interests of the creditors and ensures an orderly winding up of the company’s affairs.

In this type of liquidation, various grounds can trigger the court's involvement, including situations where the company has failed to comply with a statutory demand or has entered into insolvency. It is fundamentally different from voluntary liquidation, which occurs when the company's owners or directors decide to wind up the company themselves, without external pressure from creditors or the court.

Insolvent liquidation is sometimes used as a synonym for compulsory liquidation but is not an official term to describe the legal process, while administrative liquidation refers specifically to a process undertaken by appointed administrators to manage a company's affairs outside of court. Thus, the definition and process surrounding compulsory liquidation align perfectly with legal circumstances where court intervention is necessary due to a company's inability to settle its debts.