Corporate Recovery and Insolvency terminology

Solvent Liquidations

Shareholders can put a company into liquidation when it is solvent, i.e. is able to pay all creditors’ claims in full within 12 months. This will bring a company to the end of its life when it is no longer required. The process is often used as a part of restructuring of a group of companies when, for example, dividing up various parts of a business and moving them into separate new companies created for the purpose. This process is usually tax neutral. In any event it is a safer and more efficient way of dissolving a company rather than simply having it struck off from the company’s register at Companies House as it draws a line under all liabilities generally without any recourse to the directors and shareholders should further liabilities arise at a later date.