The difference between dissolving a company vs liquidation

Liquidation: This involves the payment of debts and liabilities owed when a company is going to be closed down. Together with the payment of employees, taxes, etc it may also have assets that need selling. Through liquidation employees have the prerogative to make financial claims that can be paid from the related government fund. 

 

For the liquidation process, the board of directors or creditors must appoint a Licensed Insolvency Practitioner. Before that, all creditors are issued notices and all stakeholders are invited to meetings to discuss the appointment of a liquidator. Both liabilities and assets must be settled. 

 

For the entire process to be completed it could take anywhere between a couple of months to a year or even longer before the liquidation is completed and the company name is removed from the Companies House register. 

 

Dissolution: This involves the company being removed from the Companies House Register. This can be undertaken for a number of reasons including Liquidation, Administration and Inactivity. Unlike the liquidation process, dissolving a company does not need a liquidator to be employed. It only requires a DS01 form from Companies House that is to be completed and submitted. Once submitted there is a cooling off period of 60 days to allow any objections to be raised against the dissolving the company. 

 

Several guidelines need to be followed that protect creditors and shareholders prior to the company filing for dissolution. There are high penalties applied if creditors and shareholders are not informed in advance of the decision to dissolve the company.