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Liquidation may either be compulsory (sometimes referred to as a creditors' liquidation) or voluntary (sometimes referred to as a shareholders' liquidation, although some voluntary liquidations are controlled by the creditors, see below).

In addition, the term "liquidation" is sometimes used when a company wants to divest itself of some of its assets.

The parties who are entitled by law to petition for the compulsory liquidation of a company vary from jurisdiction to jurisdiction, but generally, a petition may be lodged with the court for the compulsory liquidation of a company by: The grounds upon which one can apply for a compulsory liquidation also vary between jurisdictions, but the normal grounds to enable an application to the court for an order to compulsorily wind-up the company are: A "just and equitable" winding-up enables the grounds to subject the strict legal rights of the shareholders to equitable considerations.

A "just and equitable" winding-up enable the ground to subject the strict legal rights of the shareholders to equitable considerations.The liquidation must be announced in the specific gazettes and all the creditors must be notified in written regarding the process, so claims can be submitted.An intermediary liquidation balance must be issued after the term posted in the announcement for issuing claims has expired.In fact, a liquidating trust can be a cost effective, simplified structure to wind down a solvent company and realize some value for stockholders.In the context of a managed liquidation it can be particularly effective as the final stage of a well planned wind down process.