What is company liquidation?
Liquidation is a legal process in which a liquidator is appointed to ‘wind up’ the affairs of a limited company. At the end of the process, the company ceases to exist. Liquidation does not mean that the creditors of the company will necessarily get paid.
The purpose of liquidation is to ensure the company’s affairs have been dealt with properly. This involves:
completing, transferring or otherwise bringing to an end all company contracts (including employee contracts);
ceasing the company’s business;
settling any legal disputes;
selling any assets;
collecting in money owed to the company;
distributing any funds to creditors; and
returning share capital to the shareholders if there is a surplus after repayment of all debts.
When this has been done, the liquidator will apply to have the company removed from the register at Companies House and dissolved. This means it ceases to exist
The reason for Administration
This procedure starts with the appointment of an administrator and can be used to:
1) rescue as a going concern a company having financial problems
2) achieve a better result for the creditors of the company as a whole than would be achieved in
an immediate winding up
3) or, if neither are possible, realise property for the benefit of secured or preferential creditors.