Insolvency can be a way for a company to exit the market – if there is no longer any demand for its business model, for instance. Liquidation of a company, however, is also possible outside insolvency. There can be various reasons for doing this:
- The company may be deliberately running down its operations, for example, perhaps because it is realigning its business model or serving new markets and cannot or no longer needs to keep the company. It may also wish to avoid insolvency proceedings for reputational reasons or because of the risks of avoidance.
- It is also possible that the company was only ever intended to operate for a limited period.
- Or a shareholder may decide – with a heavy heart – to wind up the company because he or she wishes to retire but is unable to find a successor.
While the articles of association can set out possible grounds for dissolution, liquidation or winding up a business is also, depending on the legal form of the company, governed by various laws such as the Limited Liability Companies Act (GmbH-Gesetz, GmbHG) or the Commercial Code (Handelsgesetzbuch, HGB);