What is the difference between dissolving and liquidating a company

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Once the directors are believed to have made a full enquiry into the company’s financial affairs and the company is in fact solvent, the first step in winding up a company is to hold a meeting of the board.

After this, there are several steps leading up to liquidation and striking a business off the register.

If the company is insolvent or the majority of directors cannot agree on a Declaration of Solvency, winding up would utilise a Creditors’ Voluntary Liquidation procedure.

One of the first steps in liquidating a company is the directors’ resolution.Once all long-term relationships have been severed and obligations have been dealt with, the business’ assets are liquidated (sold) and according to UK law, this must be handled by a licensed Insolvency Practitioner. If the business is solvent and all debts are satisfied, the proceeds are distributed among members.If the company is insolvent, the top priority is paying off creditors even if there is nothing left to be distributed to members.Many people believe that Winding Up and Liquidating a company are basically the same thing but they are actually quite separate steps in the process of going out of business.Winding Up involves ending all business affairs and includes the closure of the company (including liquidation or dissolution), whilst Liquidation is specifically about selling off company assets in order to pay creditors.

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