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Liquidation | Solvent Liquidation | Insolvent Liquidation

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Liquidation | Solvent Liquidation | Insolvent Liquidation

To look at solvent liquidation vs insolvent liquidation, we first need to look at a commonly asked question: ‘What’s the difference between solvent and insolvent liquidation?’ 

The main difference between solvent and insolvent liquidation is that each is used in a different circumstance, depending on the financial status of your company. 

Solvent liquidation is the liquidation of a company that is solvent. Which means that it can pay its debts on time and in full. There might also be profits inside the company. If this applies to your company, it can be liquidated through a formal process called a Members’ Voluntary Liquidation (MVL).  

Insolvent liquidation is the liquidation of a company that is insolvent. Which means that it can’t pay its debts on time and in full, now or in the future. While it might have assets like stock or premises, it needs to liquidate these to turn them into cash to be able to afford to pay its debts. This can be done using a Creditors’ Voluntary Liquidation (CVL).  

Beyond this, the difference between solvent and insolvent liquidation lies in the practical steps taken by the licensed insolvency practitioner closing the business.  

Liquidation | Insolvent Liquidation | Solvent Liquidation

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