Liquidation Process

What Is Liquidation of a Company?

What is the Liquidation of a Company?

Do you have questions regarding the liquidation of a company?  If you determine liquidation is your best course of action, will you be held personally responsible? There is not a single answer to these questions as the terms and conditions that companies need to follow will vary depending on the type of liquidation and also the jurisdiction in which it takes place. We are happy to provide a general overview, but for your specific situation, consult with an attorney or tax expert to get professional advice before you begin the process. 

The Topline Answer to: What is the Liquidation of a Company?

The simple answer to what is the liquidation of a company is that it is the process for selling a company’s assets and property for the purpose of paying creditors or as a means of closing a business. There are three types of company liquidation and each one has its own prerequisites and special guidelines. The most straightforward process is a members’ voluntary liquidation where a business is solvent but chooses to close the business for reasons other than debt. 

When a limited company is unable to pay its bills and owes more than it owns, it is insolvent and may choose to place itself into what is known as a creditors' voluntary liquidation. Compulsory liquidation is the most onerous process and is the result of a company’s creditors petitioning the court to force the business into liquidation.  

During the liquidation process:

  • An authorized liquidator is appointed who is in charge of collecting and dealing with the company’s assets and then distributing the funds to creditors
  • The director of an insolvent company must fully cooperate with the liquidator and submit all financial records including bank statements and insurance policies.
  • In most cases, a director is not responsible for the company’s debt as long as the debt was unsecured and not personally guaranteed, and there is no proof of wrongful or fraudulent activity. 

Rabin is an international company that specializes in creating liquidity for complex manufacturing facilities with idle or marginally productive assets.  Rabin’s operations include selling entire plants, multiple plant locations, or surplus individual items by auction or liquidation and much more. Past auctions include names such as Hostess, Braniff Airlines, Montgomery Ward, and the Railway Express Agency. Contact us to get professional and practical advice for the complex questions regarding “what is the liquidation of a company?”   

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What is Liquidation of a Company