What are the three types of liquidation?

The third type is Members' Voluntary Liquidation (MVL) for solvent companies. This is a formal process initiated by the company's shareholders to dissolve the business voluntarily. It is often chosen to facilitate a straightforward closure or to distribute assets to shareholders in a tax-efficient manner.

There are three distinct types of liquidation. Each serves a unique purpose in the financial lifecycle of a company.

One type is Creditors' Voluntary Liquidation. This occurs when the directors of a company realize it is insolvent and cannot continue operating. They then call a meeting of creditors to propose liquidation, and if approved, a liquidator is appointed to manage the winding-up process.

Another type is Compulsory Liquidation. This happens when a company fails to meet its financial obligations, leading to creditors petitioning the court for its liquidation. The court appoints a liquidator to take control of the company's assets and distribute them among creditors.

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