{"id":1337,"date":"2019-04-26T05:54:05","date_gmt":"2019-04-26T04:54:05","guid":{"rendered":"https:\/\/www.mintformations.co.uk\/blog\/?p=903"},"modified":"2025-08-19T16:03:45","modified_gmt":"2025-08-19T16:03:45","slug":"difference-between-dissolution-and-liquidation","status":"publish","type":"post","link":"https:\/\/www.mintformations.co.uk\/blog\/difference-between-dissolution-and-liquidation\/","title":{"rendered":"What is the difference between dissolution and liquidation?"},"content":{"rendered":"<p>The term dissolve and liquidate can be easily confused because it means the same thing when it comes to actions, in the business world. However, they are not exchangeable terms. Here we highlight the key differences.<\/p>\n<h2>What is dissolution?<\/h2>\n<p>The end of a company as a legal entity is called <a href=\"https:\/\/www.mintformations.co.uk\/services\/companies-house\/company-dissolution\/\" rel=\"noopener noreferrer\">dissolution<\/a>. Dissolving is the process of striking off or removing a company from the <a href=\"https:\/\/www.mintformations.co.uk\/companies-house-registration\/\">Companies House register<\/a>. It is applicable to situations where a company has served its purpose in full or has become surplus to requirements.<\/p>\n<p>Also, it is carried out if the company is no longer active\/trading and it is unlikely to be needful in the future. The director of a company can choose to dissolve his\/her company by completing a DS01 form.<\/p>\n<h2>When can a company apply to be struck off?<\/h2>\n<p>Company dissolution can be done if the company:<\/p>\n<ul>\n<li>Has not traded or sold any stock in the last 3 months<\/li>\n<li>Has not changed names in the last 3 months<\/li>\n<li>Have no debts or agreements in place with creditors<\/li>\n<\/ul>\n<p>However, Companies House also has the rights to dissolve a company for non-compliance. Non-compliance means:<\/p>\n<ul>\n<li>Not having a director in order<\/li>\n<li>Failing to file annual returns<\/li>\n<li>Failing to file annual accounts<\/li>\n<\/ul>\n<p><object data=\"https:\/\/www.mintformations.co.uk\/blog\/wp-content\/uploads\/2022\/06\/mint-24-5.svg\" type=\"image\/svg+xml\" width=\"300\" height=\"150\"><\/object><\/p>\n<h2>What happens next?<\/h2>\n<p>Once the dissolution process is initiated, the request for the company to be struck off will be published as a notice in the local gazette. If no one objects, then the company will be struck off from the Companies House register once the 2 months mentioned in the initial notice had passed.<\/p>\n<p>A second notice will be published in the Gazette \u2013 and it serves legal declaration of the company\u2019s dissolved state. It will remain in the Companies House register marked as \u201cdissolved\u201d and stay this way for 20 years. From this point forward, it will be archived and will no longer be present on the register.<\/p>\n<h2>What is liquidation?<\/h2>\n<p>Liquidation is extracting a company&#8217;s assets and breaking them down to pay off the shareholder and creditors (if any).<\/p>\n<p>There are three main types when it comes to liquidation:<\/p>\n<h3>Compulsory Liquidation:<\/h3>\n<p>A compulsory liquidation is where creditors force a company into liquidation in order to recover the debt the company owes. It is the most negative outcome for the company\u2019s directors as it impacts their reputation.<\/p>\n<h3>Member\u2019s Voluntary Liquidation (MVL):<\/h3>\n<p>A Member\u2019s Voluntary Liquidation is an option where a company has the ability to pay off its debts, notwithstanding there is a desire among (at-least) three-quarters of the company\u2019s directors to dissolve the company. A liquidator is assigned to realize the assets and to convert them into cash to pay off the creditors. The shareholders receive the resulting balance if any.<\/p>\n<p>Common reasons for MVL includes when the director of an existing company wishes to retire or free up possessions to fund a new business.<\/p>\n<h3>Creditor\u2019s Voluntary Liquidation (CVL):<\/h3>\n<p>A Creditor\u2019s Voluntary Liquidation happens when the director and the shareholders realize that the company\u2019s debts cannot be repaid. This state occurs when liabilities exceed the company\u2019s assets and carrying on is not a viable option. The appointed liquidator manages the process and gathers the creditor\u2019s input. Company\u2019s assets are sold and any surplus is distributed to its members.<\/p>\n<p>Looking for further <a href=\"https:\/\/www.mintformations.co.uk\/blog\/start-new-business-uk-8-points-must-consider\/\" rel=\"noopener noreferrer\">guidance <\/a>on dissolve or liquidating limited company with tax competency in mind? Check out our <a href=\"https:\/\/www.mintformations.co.uk\/support\/company-formation-faq\/\" rel=\"noopener noreferrer\">company formation FAQ\u2019s<\/a> or contact us <a href=\"https:\/\/www.mintformations.co.uk\/ukcompany-registration-contact\/\" rel=\"noopener noreferrer\">here<\/a> for more information.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The term dissolve and liquidate can be easily confused because it means the same thing when it comes to actions, in the business world. However, they are not exchangeable terms. Here we highlight the key differences. What is dissolution? The end of a company as a legal entity is called dissolution. Dissolving is the process [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":1166,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[32,6],"tags":[109,110,111],"class_list":["post-1337","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-companies-house","category-company-formations","tag-company-dissolution","tag-dissolution-and-liquidation","tag-types-of-company-liquidation"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Dissolution vs Liquidation of LTD Company Explained<\/title>\n<meta name=\"description\" content=\"Dissolution and liquidation of limited company are separate terms often used interchangeably. Find out the important differences today.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.mintformations.co.uk\/blog\/difference-between-dissolution-and-liquidation\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Dissolution vs Liquidation of LTD Company Explained\" \/>\n<meta property=\"og:description\" content=\"Dissolution and liquidation of limited company are separate terms often used interchangeably. 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