What initiates a Compulsory Liquidation?

A compulsory liquidation is initiated by a court order to wind up a company, which makes the choice of a court order the correct answer. In this process, a creditor, or occasionally a regulatory body, petitions the court to liquidate the company due to its inability to pay its debts. This legal procedure involves the court recognizing that the company is insolvent and therefore requires the appointment of a liquidator to oversee the distribution of its assets to creditors.

The other options involve different types of liquidation or decision-making processes. A decision by shareholders would typically relate to voluntary liquidation, where the shareholders themselves decide to wind up the company. Approval from creditors also pertains to voluntary arrangements or compromises when the creditors agree to certain terms, often in a situation where the company is trying to negotiate its debt. A written application from a director might initiate a voluntary liquidation process as well but does not apply to compulsory situations initiated by the court. In essence, compulsory liquidation is distinct because it is entirely court-driven based on the legal status of the company's financial condition.