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Liquidation is a formal insolvency procedure in which a company is brought to an end; all of its assets are liquidated and the proceeds from the sale of assets is used to repay creditors.

It is imperative that when companies are facing financial challenges, the directors seek proper advice to fully understand the potential ramifications against them.

If severe enough, it will lead to the likely bankruptcy of the directors.

There are two forms: cash-flow insolvency and balance-sheet insolvency.

Cash-flow insolvency is when a person or company has enough assets to pay what is owed, but does not have the appropriate form of payment.

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