Starting up a venture can be a thing of joy but sustaining it is what might seem difficult. Several issues might occur that might result in an entrepreneur finding means to salvage the problems. One of those means are liquidation.

What is does it mean to liquidate a business?

Before we define business liquidation, it would interest you to know that not only small businesses undergo liquidation. Even well-established businesses might decide to undergo liquidation as their insolvency option.

Having said that, business liquidation is the selling of a business’s assets to offset its debt. The financial background of the business is deeply looked into by the liquidator. This is done to ascertain the causes of the financial downfall of the business.

Liquidation can only be done to businesses under the company structure. People usually misconstrue liquidation for bankruptcy, but they are two different things. While liquidation is for only company structure, bankruptcy is usually associated with sole traders, proprietors, and partnerships.

The job of the liquidator is to assess the financial affairs of the business and cease all business operations. Also,  liquidation is not the same as sales. Once your business is liquidated, it means it is completely dissolved. All business operations are stopped completely, not put on hold. More details!

The liquidation process

First, you need to know that for your business to need liquidation, that means it was unable to pay off its debts. This type of liquidation is called involuntary liquidation. A court order is usually ordered to effect it.

A business can also decide to be liquidated after a collective decision by the major stakeholders. This kind of liquidation is called voluntary liquidation. The reason might be that your expenditure greatly outweighs your interest. Another reason might be because the financial projections for the business do not fall in your favor.

Before a company is voluntarily liquidated, it must have undergone a deed of company arrangement or voluntary administration. And the business owners and stakeholders must have agreed that the business is no longer profitable.

After liquidation, the bank accounts of the business are blocked. Authority is stripped from the administrative body of the business, and all pending deals are closed.

What happens to creditors after a business is liquidated?

After a business is liquidated, unsecured creditors can no longer ask to be paid. The only way they can ask to be paid is if they have a court order. A court order can ask that the business still pay them.

Why should I choose liquidation?

Liquidation is the most convenient to end a business. With liquidation, all secured creditors are paid back whatever you owe them. Your assets are distributed in an orderly way to the creditors.

Liquidation is a cheap way to close your business. Liquidation saves your business from the stress of insolvency. Also,  with liquidation, you can secure the jobs of your employees. The liquidator might decide to retain them for the continuance of the business. That way, your employees would appreciate you.


If there are financial strains in your business,  you may want to consider liquidating it. It will save you from shame on the side of your creditors. For more information visit: