Liquidation legally ends or ‘winds up’ a limited company. It will stop doing business and employing people. It will be removed (‘struck off’) from the register at Companies House, which means it ceases to exist.
Both solvent and insolvent companies can be wound up by their own directors.
For an insolvent company, the process can be through a creditors voluntary liquidation.
For a solvent company whose directors have decided to stop trading it’s members voluntary liquidation.
The process of removing the company from the register is still called ‘striking off’ for all methods of liquidation.
Creditors can also apply to wind up an insolvent company up through compulsory liquidation.
Liquidation is overseen by a licenced insolvency practitioner ( or in the case of a compulsory liquidation, the official receiver). It involves:
making sure all company contracts (including employee contracts) are completed, transferred or otherwise ended
ceasing the company’s business
settling any legal disputes
selling any assets
collecting money owed to the company
distributing any funds to creditors (eg through a CVA)
repaying share capital to shareholders
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