What happens when a company goes into liquidation?

When a company goes into liquidation, business operations are shut down and any remaining assets are sold to pay back the debts incurred by the firm. As a side effect, employees are laid off and may receive redundancy payments.

Once all debts have been settled, any remaining money gets divided between the shareholders. If a company cannot pay its debts and is forced to liquidate, it is referred to as a creditors’ voluntary liquidation. On the other hand, a company may be able to afford to pay its debts but instead the decision is made to liquidate. In this case, the liquidation is called a members’ voluntary liquidation.