Liquidation- the procedure
Meaning of Liquidation
Liquidation or winding up is a legal term and refers to the procedure through which the affairs of a company are wound up by law. Winding up of a company has been defined in the companies Act, 1956 as “the process whereby its life is ended and its property is administered for the benefit of its creditors and its members. An Administrator called Liquidator, is appointed and he takes control of the company, collects its assets pays its debts and finally distributes any surplus among the members in accordance with their rights.”
A Company being a creation of Law, cannot die a natural Death. It comes to an end by Law through the process of Liquidation or winding up. On Liquidation the affairs of a company are wound up and its name is struck off from the Register of Companies maintained by Registrar of Companies.
Liquidation is Different from Insolvency. The term ‘insolvency’ is applicable to individuals, partnership firms, Hindu Undivided families whereas, the term ‘Liquidation’ is applicable to a joint Stock Company. But it may be mentioned that the insolvency of a company is not a necessary condition for its Liquidation whereas an individual, partnership firm, Hindu Undivided family is said to be insolvent when liabilities exceed assets or has committed an act of insolvency. A solvent company can also be liquidated. Another difference between insolvency and Liquidation is that the former is governed by the insolvency act and the latter is governed by the Companies Act.
MODES OF WINDING UP OR LIQUIDATION
Section 425(1) of the Companies Act provides that a Comapany can be Liquidated in any of the following 3 ways:-
I. Compulsory winding up by the court;
II. Voluntary winding up by the members or creditors;
III. Winding up under the supervision of the court;
Generally (unless the contrary appears) the provision of the Act with respect to the winding up of a company wether it be by the court or voluntary or subject to the supervision of
Liquidation or winding up is a legal term and refers to the procedure through which the affairs of a company are wound up by law. Winding up of a company has been defined in the companies Act, 1956 as “the process whereby its life is ended and its property is administered for the benefit of its creditors and its members. An Administrator called Liquidator, is appointed and he takes control of the company, collects its assets pays its debts and finally distributes any surplus among the members in accordance with their rights.”
A Company being a creation of Law, cannot die a natural Death. It comes to an end by Law through the process of Liquidation or winding up. On Liquidation the affairs of a company are wound up and its name is struck off from the Register of Companies maintained by Registrar of Companies.
Liquidation is Different from Insolvency. The term ‘insolvency’ is applicable to individuals, partnership firms, Hindu Undivided families whereas, the term ‘Liquidation’ is applicable to a joint Stock Company. But it may be mentioned that the insolvency of a company is not a necessary condition for its Liquidation whereas an individual, partnership firm, Hindu Undivided family is said to be insolvent when liabilities exceed assets or has committed an act of insolvency. A solvent company can also be liquidated. Another difference between insolvency and Liquidation is that the former is governed by the insolvency act and the latter is governed by the Companies Act.
MODES OF WINDING UP OR LIQUIDATION
Section 425(1) of the Companies Act provides that a Comapany can be Liquidated in any of the following 3 ways:-
I. Compulsory winding up by the court;
II. Voluntary winding up by the members or creditors;
III. Winding up under the supervision of the court;
Generally (unless the contrary appears) the provision of the Act with respect to the winding up of a company wether it be by the court or voluntary or subject to the supervision of