Liquidation

If directors of the company believe that the company is insolvent and that there is no prospect of rescuing the company under another insolvency procedure, then in conjunction with the insolvency practitioner, the company is closed. A creditors meeting is called to consider the acts and dealings of its directors and a liquidator is appointed to realise the assets and distribute the available funds in accordance with the law.

The company may have ceased to trade, however, sufficient funds allow creditors to be paid in full and a distribution to the shareholders. This is a tax efficient way in which funds are transferred to shareholders as the Revenue will usually treat a distribution in a member’s voluntary liquidation as a return of capital rather than income, resulting in a lower tax charge on the recipient.