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For a company to meet the necessary conditions to qualify as a liquidation under the Insolvency Act provisions several factors must be present.

In its most usual form an Insolvency Act liquidation scheme (often known as a Section 110 Scheme)¹ involves the solvent liquidation of a parent company (pursuant to a special resolution of the shareholders of the parent to wind up the company) and the transfer by the liquidator of the parent company's assets to two or more newly formed companies. It is also possible for an insolvent company in creditors' voluntary liquidation to implement a Section 110 Scheme, either with the sanction of the court or the liquidation committee.

Each new company issues shares to the shareholders (in satisfaction of the shareholders' rights) of the liquidated parent company in consideration for those assets. The parent company is then dissolved, leaving two or more companies each holding part of the assets of the original parent company.

The following key steps are required to implement