ECONOMICS

Detailed explanation-1: -When a company becomes insolvent, meaning that it can no longer meet its financial obligations, it undergoes liquidation. Liquidation is the process of closing a business and distributing its assets to claimants. The sale of assets is used to pay creditors and shareholders in the order of priority.

Detailed explanation-2: -What are the differences between liquidation and dissolution? Dissolving a company through the process of dissolution often takes place when a company is solvent, but is no longer trading. Liquidation however, occurs due to a company having financial difficulties and therefore being unable to keep up with their debts.

Detailed explanation-3: -If a company or person becomes insolvent (also called ‘going bust’) when you owe them money, you still have to pay it. The official receiver or the insolvency practitioner will contact you.

Detailed explanation-4: -When you liquidate a company, its assets are used to pay off its debts. Any money left goes to shareholders.