What are the Effects of Liquidation on a Company?

The consequences of all liquidations are that 

(a) the company stops trading

(b) the powers of the directors cease

However, other effects will depend on what type of liquidation has taken place. In this article we’ll discuss the different types of liquidation alongside their specific repercussions.

Business Liquidation Effects are Dependant on the Type of Insolvency

Compulsory Liquidation – Where creditors have forced a company into liquidation, an Insolvency Practitioner will take control of your business, leaving directors with few options. There will certainly be an investigation into directorial conduct in the period preceding the insolvency which could leave directors open to charges of wrongful trading.

Voluntary Liquidation – Where a company chooses voluntary liquidation, the directors retain more control, and can proceed at a pace which suits them.

Other Consequences of Insolvent Liquidation

In most cases liquidations end with the dissolution of the company, meaning it is struck off the register at Companies House. The liquidator’s job is to realise the assets of the company by selling them off and distributing the money to creditors in their order of priority.

Company directors will be left without their position, although there may be the possibility to purchase some of the company’s assets (including intellectual property) through a pre-pack administration.

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