?Liquidation is when a full company or just a part of a company is closed down and
the assets of the company as well as the property get reorganized. Liquidation might
also mean dissolution, but sometimes dissolution means that it is the last stage of
Liquidation of a company can be due to insolvency, where they have not paid their
debts. When it comes to finance, liquidation might often be used when changing an
asset into cash.
There are mainly three different kinds of liquidation; these are compulsory, members
voluntary and creditors' voluntary liquidation. Compulsory is often referred to as a
creditors' liquidation where as the voluntary liquidations are also sometimes referred
to as shareholders. It all depends on the situation of the company.
This is when the court has the company wound up on the petition of a suitable
individual, but if there is more than one individual, they will all have to present the
petition as only one director cannot present it on his own.
Members' Voluntary Liquidation
This is when the decision of liquidation is made by the shareholders of the company,
and the assets will be enough to pay off all the company's debts; in other words, the
company is solvent.
Creditors' Voluntary Liquidation
This happens when the members of the company are the ones to decide that their
company should be put into liquidation, but there are not enough assets to pay off the
debt of the company, this means the company is insolvent.