Liquidation in Companies

Under the company law there is a process called company liquidation. This is when a business basically ceases to exist for a variety of reasons, but the main one being financial, retirement, and debt. However to avoid this situation you could look at exit strategies and always monitor extenal factors so you know when you your business is at its highest potential for a sale. There are expert business agents who can help sell my business so you can avoid going down the liquidation route

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A lot of thought and options appear when there is a possibility that this may become an issue, they differ depending on if you are the sole trader or if there is a redundancy payment scheme etc. Certain ways are easier than others, other ways are a bit more of a challenge. Larger businesses often look for a professional business or individual who has insight training as well as finance training. A sole trader simply needs to personally inform all your clients, contacts, and customers that you have finished trading, there is also a tax form to complete if you wish to cancel that also.

The two types

When facing liquidation you need to understand that their are two separate cases. The first type is compulsory, this is when it has been court ordered and urgent. Normally this means that the business in question is insolvent, and their has been a longstanding issue with repayments and financial debt. This is serious and leads to problems with creditors, and loans. The other is voluntary, due to either retirement, money issues, or a simple shareholders decision. Either way liquidation is the only necessary next step for all involved.


Insolvency is a high severity case when the court has become involved. Normally the court could call in a receiver in some circumstances when a loan is agreed upon. Their job is to take hold of every asset available needed in order to achieve the loan status. Once this has become secured they then sell all the collected assets for the lender which is usually a short enough process.

Notifications redundancy

The notification process involves all parties being informed about the liquidation of the company. This can be done by a represented chairman, or in the case of the sole trader the CEO themselves. All employees do remain 100 protected under the legal law, and in the case of bad finances you may need to consider redundancy to keep protecting their rights and end working terms fairly. 2 weeks notice is the fair amount of notice required in most work contracts, also the payments would need to be dispensed in around or before the final paid working date. If fair terms are not agreed upon they would respectfully be in their rights to complain and take action if they believe they have been unfairly dismissed, it doesn't matter if your business is suffering financial debt either.


The legal way to deal with assets after a company faces liquidation is distribution and then paying off creditors. There is then a priority about how the distribution will occur, for example high priority will obviously fall into the pending expenses category, this is then followed by wages for all the employees, unsecured creditors, and finally any outstanding debt to possible shareholders that where involved in the companies time of trading. It is best to follow each step carefully in this process and at least cease trading legally.