Liquidation, the winding-up of any business, but applied more particularly to joint-stock companies. The liquidation of insolvent firms is treated under BANKRUPTCY; that of registered companies is regulated by the Companies Acts, which provide three modes of liquidation: (1) by the court, (2) voluntary, and (3) subject to the court's supervision. Compulsory liquidation may be ordered on petition by a creditor or contributory; voluntary liquidation may be resolved upon by an extraordinary or a special resolution of the shareholders; and a supervision order may on petition and cause shown be pronounced in a voluntary liquidation.
In any case the liquidation is conducted by a liquidator, who in court liquidations is appointed by the court and called 'official liquidator,' but in voluntary liquidation is chosen by the shareholders. The liquidator's duty is to wind up as speedily as possible, but he may carry on the business temporarily should that appear necessary for a favourable realisation. He must also prepare a list of contributors, if the capital is not fully paid up or the company is unlimited. This list, which is made up from the register of shareholders, consists of members in their own right and those liable as representatives of others. In addition to these, there is a list (B) of those who have been members within a year of the winding-up and who are liable, if the existing members are unable to satisfy the necessary contribution. They can only, however, be called upon to contribute in respect of unpaid debts incurred before they ceased to be members. A contributory cannot set off a debt due to him by the company against calls by the liquidator so long as any creditors remain unpaid. The claims are ranked and adjudicated upon very much as in bankruptcy, and the surplus, if any, is divided among the shareholders. Unregistered companies, except railway companies incorporated by act of parliament, may be wound up under the provisions of the Companies Acts.