Liquidation - Wind Up



What is Liquidation?
Liquidation applies only to corporations. A corporation goes into liquidation even though people often say that a corporation has gone bankrupt. The term bankruptcy applies only to non-corporation, such as partnerships, sole traders or individuals.

A corporation liquidation occurs when the creditors of the corporation (the people to whom the corporation owes money) bring an action to have the corporation liquidated because they had not been paid. Liquidation can also be brought about by the shareholders of the corporation when they agree to liquidate the business for some reason or when a previously specified event has occurred.


How Does Liquidation Arise?
As soon as the directors of a corporation, or its shareholders, become aware that their corporation is unable to pay its debts, they should consider putting the corporation into liquidation. This is because of the fact that if they continue to trade and incur extra debts after the corporation is determined as being insolvent they can b...

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