Jurisdiction(s):
United Kingdom

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Key definition

Liquidation definition

What does Liquidation mean? Liquidation (statutory term: winding up) is the formal process for closing a company, under which a liquidator takes control, stops or sells the business, collects and realises assets, adjudicates creditor claims and distributes proceeds according to statutory priority, before dissolution. It is used both on insolvency (to repay creditors) and, in a solvent members’ voluntary liquidation (MVL), to return surplus to shareholders. In England & Wales and Scotland, liquidation is governed principally by the Insolvency Act 1986 and associated Rules. The main routes are compulsory liquidation (winding up by the court), creditors’ voluntary liquidation (CVL) and MVL. In Northern Ireland,...

Liquidation in England and Wales: MVL, CVL and compulsory winding up—process, effects, appointments and comparison

Published by a LexisNexis Restructuring & Insolvency expert

Practice notes

Process and effect

liquidation, or winding up, is the method by which a company’s affairs are concluded and the company’s existence is brought to a close. When a company enters liquidation:

its trade stops, although it may need to be continued for a short period during the winding up (for example, to enforce any valuable agreements)
its assets are realised, meaning converted into a liquid form
the resulting proceeds are paid out to those entitled

A liquidator must perform this role in accordance with the duties imposed and powers given to them under the insolvency Act 1986 (IA 1986) and the Insolvency (England and Wales) Rules 2016, SI 2016/1024. For more details, see Practice Note: Role, powers, functions and duties of a liquidator...

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Web page updated on 27/05/2026

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