Glossary

What is Liquidation?

The formal process of closing an insolvent company and selling its assets to pay creditors.

When a company is in liquidation, a licensed insolvency practitioner (the liquidator) takes control, sells its assets and distributes the money to creditors in a fixed order. Unsecured creditors — like most freelancers — are paid last, and often receive only a fraction of what they are owed.

You cannot sue a company in liquidation in the normal way. Instead, submit a "proof of debt" to the liquidator. You can check a company's status for free on Companies House.

Example

A client company enters creditors' voluntary liquidation; the freelancer files a proof of debt for £2,400.

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