A company liquidation when it is no longer able to pay its debts. The process of liquidation is usually conducted by a licensed insolvency practitioner, and the company will be closed down and removed from the Companies Register once it has been liquidated.

A liquidator takes control of all the company’s assets and sells them to repay creditors. Any proceeds from the sale are deposited into a liquidation account, from which debts and fees are paid off in order of priority. Secured creditors with claims on specific assets get the highest priority, followed by preferential creditors such as employees owed wages and benefits. Unsecured creditors are last in line, and are unlikely to recoup their entire debt.

Understanding Company Liquidation: What It Means and How It Works

Directors may choose to place a company into liquidation voluntarily, or if the business is unable to pay its debts and cannot be saved through alternative procedures such as administration or a company voluntary arrangement. The court might also force a company into liquidation through the issue of a Winding Up Petition from one or more of its creditors, or its own directors.

Once the liquidation process has been completed, your responsibilities as a director of the company cease (assuming no wrongful or fraudulent trading). You are no longer responsible for the company’s debts, and any money left will be distributed amongst shareholders per their number of shares. However, you could choose to close your company through dissolution instead.