3 Legal Terms Explained.
Liquidation. – Liquidation is the process of the ending of a company. This can follow a Winding Up Petition from the court. When a company is in Liquidation, all the assets are distributed to cover outstanding debts. After this, the company ceases to exist.
Insolvency. – Insolvency means you are unable to pay your debts. You will become insolvent when your losses consume your surplus assets.
Solvent. – Whether a company is solvent or not depends on the liquidation status. A company in liquidation is not solvent unless the directors can declare they can pay all creditors within a year.