What is the difference between dissolving and liquidating a company
Only a professional Insolvency Practitioner (IP) is qualified to liquidate a company’s assets due to the complicated and specific nature of UK law and the variables involved. Understanding which one applies to you is extremely important.The two main types are: If you are unable to pay your creditors.If the company is insolvent, the top priority is paying off creditors even if there is nothing left to be distributed to members.Whilst it is true that some of a company’s assets may be liquidated during the winding up stage, it is usual for such things as equipment and the building and/or land to be liquidated once winding up is complete. Once you have decided to go ahead with liquidating a company, you need to be aware that there are two main types of voluntary liquidation.After this, there are several steps leading up to liquidation and striking a business off the register.The process is generally followed as outlined below: 1.
Once all long-term relationships have been severed and obligations have been dealt with, the business’ assets are liquidated (sold) and according to UK law, this must be handled by a licensed Insolvency Practitioner. If the business is solvent and all debts are satisfied, the proceeds are distributed among members.
One of the first steps in liquidating a company is the directors’ resolution.
This is of particular importance if a company is seeking a Members Voluntary Liquidation as the directors will be asked to sign a Declaration of Solvency.
Many people believe that Winding Up and Liquidating a company are basically the same thing but they are actually quite separate steps in the process of closing a company.
Winding Up involves ending all business affairs and includes the closure of the company (including liquidation or dissolution), whilst Liquidation is specifically about selling off company assets in order to pay creditors and then closing the company.