For an insolvent company, directors can wind up their company through a creditors voluntary liquidation or a compulsory liquidation.
Creditors can also apply to wind-up an insolvent company up through compulsory liquidation.
A company is solvent if it can pay its debts when they fall due and insolvent if it can’t.
The financial state of the company is important because it determines what kind of liquidation the company will enter, as well as the types of investigations that a liquidator will undertake.
Members Voluntary Liquidation – where directors/shareholders close a company with large accumulated reserves.
When a company is being liquidated because it is insolvent, the liquidator has a duty to all the company’s creditors.Liquidation, also referred to as "winding up", is the process by which a company’s assets are liquidated and the company closed, or deregistered.There is one term that is crucial to understanding liquidation:"insolvent".(There is a different guide if you want to wind-up a partnership).Liquidation will stop the company doing business and employing people.