In United Kingdom, Republic of Ireland and United States law and business, liquidation is the process by which a company is brought to an end.The assets and property of the company are redistributed.If not, the liquidation will proceed as a creditors' voluntary winding-up, and a meeting of creditors will be called, to which the directors must report on the company's affairs.Where a voluntary liquidation proceeds as a creditors' voluntary liquidation, a liquidation committee may be appointed.Property which is in the possession of the company, but which was supplied under a valid retention of title clause will generally have to be returned to the supplier.Property which is held by the company on trust for third parties will not form part of the company's assets available to pay creditors.The main purpose of a liquidation where the company is insolvent is to collect its assets, determine the outstanding claims against the company, and satisfy those claims in the manner and order prescribed by law.
In that case the general meeting will appoint the liquidator(s).
Before the claims are met, secured creditors are entitled to enforce their claims against the assets of the company to the extent that they are subject to a valid security interest.
In most legal systems, only fixed security takes precedence over all claims; security by way of floating charge may be postponed to the preferential creditors.
The parties who are entitled by law to petition for the compulsory liquidation of a company vary from jurisdiction to jurisdiction, but generally, a petition may be lodged with the court for the compulsory liquidation of a company by: The grounds upon which one can apply for a compulsory liquidation also vary between jurisdictions, but the normal grounds to enable an application to the court for an order to compulsorily wind-up the company are: A "just and equitable" winding-up enables the grounds to subject the strict legal rights of the shareholders to equitable considerations.
It can take account of personal relationships of mutual trust and confidence in small parties, particularly, for example, where there is a breach of an understanding that all of the members may participate in the business, Upon hearing the application, the court may either dismiss the petition, or make the order for winding-up.