Dissolution or liquidation: Which is right for my company?

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Updated: 28th January 2021

Company dissolution and company liquidation: What's the difference?

Closing a limited company can seem like a bit of an ordeal, and whilst it certainly can be, this impression is no doubt thanks to the jargon that’s bandied about when it comes to the process. In this post we shall look at three (well technically four) culpable words; dissolution, liquidation and winding up, and explain what they actually mean - in plain English. Let’s get started.


This means the end of the company as a legal entity. A company can be dissolved voluntarily, to do this the directors simply need to complete the ‘DS01 - Striking off application by a company’ or complete the online application, and make a £8 payment to Companies House. Alternatively a company can be dissolved involuntarily for ‘non-compliance’ by Companies House. This could be for:

  • Not having a director appointment in place 
  • Failure to file annual returns
  • Failure to file annual accounts

Once dissolved a company will remain on the Companies House register - it will simply show up as dissolved. It will then be archived after 20 years, it will then no longer show up on the register.

Liquidation, also known as… winding up

Liquidation is when the assets of the company are broken down and redistributed to the shareholders and creditors (A person or company who is owed money) - the latter only being relevant if there are any.

Liquidation is actually a stage of the company dissolution, wikipedia put this best: “dissolution technically refers to the last stage of liquidation”.

There are two types of liquidation:

  • Members’ Voluntary Liquidation - The company is able to pay its debts but you wish to close it.
  • Creditors’ Voluntary Liquidation - The company is not able to pay debts.

Members’ Voluntary Liquidation - The company is able to pay its debts but you wish to close it.

Creditors’ Voluntary Liquidation - The company is not able to pay debts.

It’s important to note that if you are liquidating a company, you must appoint a ‘liquidator’; this is an authorised insolvency practitioner. This person then takes responsibility for the liquidation. We have an extensive network of 100 offices offering confidential director support across the UK.

We hope you have found this post useful. For more information about MadeSimple and our different services, take a look here:

Written by Mathew Aitken, MadeSimple - Your business essential.


Mathew Aitken

Head of Content at MadeSimple

0800 644 6080
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