Liquidation is the process of winding up the operations of a company, and selling the assets to repay the claimants (creditors, shareholders and other liabilities.) Notably, the assets are paid in order of priority of the claims. Importantly, you can always choose voluntary liquidation rather than wait for your creditors to take a legal action against your company. So, when is it proper for a company to liquidate? A company should liquidate when it becomes insolvent, meaning that it can no longer pay its bills and debts when due. Furthermore, a company may close up its operations when the liabilities exceed the assets, when there is corporate restructuring, or when it loses major investors.