Liquidation is the formal process of winding up a company, selling its assets, paying what it can to creditors and ultimately closing it down. Once liquidation completes, the company ceases to exist.
Different routes
Liquidation can be voluntary, started by the companys directors and members, or compulsory, ordered by a court. A licensed insolvency practitioner usually oversees the process.
Order of payment
There is a legal order in which creditors are paid from whatever is realised. Not every creditor is guaranteed to recover the full amount owed.
- Liquidation ends a companys existence.
- It can be voluntary or court-ordered.
- Creditors are paid in a set legal order.
If your company is heading towards serious difficulty, seek advice from a licensed insolvency practitioner early, and let Credicorp know so we understand the situation.
See also: Using Flex to manage supplier and stock costs, What if my company can only pay part of this month's amount? and What is a judgment debt?.