Process of liquidating
Liquidation refers to the procedure in which a limited company is brought to a close by an appointed Insolvency Practitioner (Liquidator).The company’s assets are then sold (liquidated) and any realisation of revenue is redistributed in order of priority.The voluntary procedures, which are initiated by the shareholders and directors are explained in more detail below and the compulsory procedure, which is usually initiated by creditors like HMRC via a court order, is also covered.Compulsory liquidation is usually initiated by a creditor that is looking to force a company into closure via a court order.The procedure is usually handled by the Official Receiver, or an appointed Insolvency Practitioner.Therefore, this is not a voluntary process for directors.The company is struck-off the registrar of companies and this is known as dissolution, which is the final stage of the liquidation process.There are two voluntary liquidation procedures and one compulsory procedure.
Sometimes people mistakenly refer to the phrase “company bankruptcy”.
Finally, shareholders receive any remaining assets, in the unlikely event that there are any.
In such cases, investors in preferred stock have priority over holders of common stock.
However, once engaged, the Insolvency Practitioners will act immediately and the company can be placed into liquidation within a two-to-three week period if sufficient information is provided, promptly.
The liquidator will remain in office until all of their responsibilities have been addressed.