Company Liquidation – What It Means And What Happens
The way you handle company liquidation depends on the circumstances leading to it. Basically, there are two ways that a company can end up in liquidation and they are voluntary which occurs in voluntary liquidation and involuntary occurring as a result of compulsory liquidation. Your business is rendered insolvent and assets vape juice, are therefore sold and the proceeds from the sale used to repay creditors to clear any debt you might have.
The steps that are followed in the liquidation process depend on the liquidation type, but the process usually involves selling off company holdings and property and then this is followed by complete dissolution and even closure of your company. It simply means that whether liquidation is compulsory or voluntary it results in the same thing; creditors are paid as possible and the company simply ceases to be in existence.
Compulsory liquidation – what happens?
For this type of liquidation, a winding up petition is lodged by a party with the court so that the insolvent company is wound up to recover any outstanding debt. Usually the petitioner is a creditor, but it can also be an official receiver or a shareholder or even a secretary of state in some cases. It is also very possible for company directors to legally lodge, this petition, but it is then considered a voluntary type of liquidation when this happens. There are several situations that can lead to a company being forced to go into compulsory liquidation. Some of the most common situations that lead to the liquidation are:
- Owed taxes
- Liabilities and debt totals that exceed the actual asset value of the company