Liquidation

A company that has been placed into liquidation is generally insolvent, which means that it is not able to pay its debts, and so cannot continue to operate. It will be wound up, and its assets will be sold to pay its creditors. Secured creditors will receive the assets that have been pledged to them, and unsecured creditors will receive payments from any unsecured assets that remain. At the end of the liquidation process, the company is dissolved. The insolvency and liquidation process is quite different to that of bankruptcy, which is much more formal and official. A court must declare an individual bankrupt, and once this happens, their legal status is that of a bankrupt. There is no change to any individual’s legal status as part of an insolvency or liquidation process.

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