Liquidation – What is liquidation?
Liquidation is a way of dealing with corporate debts that you cannot pay when they become due. However, not all companies which go into liquidation are insolvent – some can afford to pay all their debts with their assets. Liquidation is also known as “winding up” a company.
When a company is liquidated it is brought to an end, stops trading and ceases to exist. Any assets and property of the company are redistributed to creditors.
Remember: Not all companies in liquidation are insolvent.
Once your company is in liquidation, its creditors cannot take any further action against you.
Types of liquidation
There are three types of liquidation
- A members’ voluntary liquidation is where the directors or shareholders of a company decide to put it into liquidation and the company is solvent (there are enough assets to pay all the company’s debts).
- A creditors’ voluntary liquidation is where the directors or shareholders of a company decide to put the company into liquidation and the company is insolvent (there are not enough assets to pay all the company’s debts).
- A compulsory liquidation is where the court makes a winding-up order on the petition of an appropriate person, for example, a creditor.
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More information
- Liquidation – The liquidation process
- Liquidation – Winding up a company
- Liquidation – Voluntary and involuntary liquidation
- Liquidation – The advantages of liquidation
- Liquidation – The disadvantages of liquidation
- Liquidation – The alternatives to liquidation
- Liquidation – I am owed money by a company in liquidation
- Liquidation – Insolvency and liquidation
- What is bankruptcy?
- What is administration?
- What is an individual voluntary arrangement?
- What is a company voluntary arrangement?
- Companies House
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