Liquidation—an introductory guide
Liquidation—an introductory guide

The following Restructuring & Insolvency guidance note provides comprehensive and up to date legal information covering:

  • Liquidation—an introductory guide
  • Process and effect
  • Forms of liquidation
  • Effect of appointment
  • Comparison table

Process and effect

'Liquidation' or 'winding-up' is the process by which the affairs of a company and the company’s existence are brought to an end. When a company is liquidated:

  1. its business is terminated, although it may need to be carried on temporarily as part of the winding-up process (eg to enforce any valuable contracts)

  2. its assets are realised (brought into a liquid form), and

  3. the proceeds are distributed to those entitled

A liquidator must fulfil this function following the duties imposed and powers granted to them under the Insolvency Act 1986 (IA 1986) and the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024. For more information, see Practice Note: Role, powers, functions and duties of a liquidator.

Forms of liquidation

Liquidation may be either:

  1. insolvent (where a company is unable to pay its debts or its liabilities are greater than its assets), or

  2. solve