Liquidation vs dissolution
Liquidation and dissolution both end with a company ceasing to exist, but they are very different processes and using the wrong one can be a costly mistake. Dissolution, achieved through a strike off, is an administrative ending for a clean company. Liquidation is a formal insolvency process run by a Licensed Insolvency Practitioner, and the proper route for an insolvent one. Companies House; Insolvency Service
- Dissolution (strike off)
- Administrative removal from the register; solvent companies only
- Liquidation
- Formal insolvency process run by a practitioner
- Creditors
- Dissolution does not deal with them; liquidation does
- Insolvent company
- Needs liquidation, not dissolution
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At a glance
| Liquidation | Dissolution (strike off) | |
|---|---|---|
| What it is | A formal insolvency process run by a practitioner | Administrative removal from the Companies House register |
| Best for | An insolvent company with creditors | A solvent or dormant company with no real debts |
| Deals with creditors? | Yes, paid in legal order of priority | No |
| Conduct review | The liquidator reviews director conduct | No formal review, but dissolved companies can be investigated |
| Cost | From ~£4,000 to £7,000 plus VAT for a CVL | A small Companies House filing fee |
| If used wrongly | The proper route for an insolvent company | Striking off with debts usually fails and can expose directors |
Clean company versus insolvent company
Dissolution simply removes a company from the Companies House register. It is cheap and suitable only for a solvent or dormant company with no real debts, and it does not deal with creditors or write off debts. In liquidation, the company's assets are sold, creditors are paid in the legal order of priority, director conduct is reviewed, and the company is then dissolved at the end.
If the company is solvent and debt-free, dissolution by strike off is fine. If it is insolvent, liquidation is the proper route, because a strike off will usually be objected to by HMRC, does not clear the debts, and can expose directors to investigation now that dissolved companies can be examined. The objection risk checker helps you tell which applies.
Common questions
Is dissolution the same as liquidation?
No. Dissolution removes a company from the register and suits solvent, debt-free companies. Liquidation is a formal insolvency process that deals with creditors. An insolvent company needs liquidation, not dissolution.