Liquidation is the process of winding up the affairs of a company before dissolution and can be used in solvent (Members' Voluntary Winding Up) and insolvent (Creditors' Voluntary Winding Up or Winding Up by Court) situations.
The company will stop doing business and employing people. The company will not exist once it’s been removed (‘struck off’) from the companies register at the ROCBN.
When you liquidate a company, its assets are used to pay off its debts. Any money left goes to shareholders.
There are 3 types of liquidation:
Creditors’ voluntary winding up (liquidation) - your company cannot pay its debts and you involve your creditors when you liquidate it
Members’ voluntary winding up (liquidation) - your company can pay its debts but you want to close it
Compulsory liquidation (Winding up by court) - your company cannot pay its debts and you apply to the courts to liquidate it
Creditors’ Voluntary Winding Up
Company may opt for a creditors' voluntary winding up if the directors believe that it cannot, by any reason its liabilities, continue its business. The company will appoint a liquidator, to wind up its affairs of the company and distributing its assets.
Where a company is already in voluntary winding up, the Court may still grant leave to wind up the company compulsory if it is satisfied that it is necessary to do in the interests of the company's creditors and contributories.