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C OMPANY L IQUIDATION A CCOUNTS. M EANING OF L IQUIDATION A company is an artificial person. It is created by law and therefore law alone can dissolve.

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Presentation on theme: "C OMPANY L IQUIDATION A CCOUNTS. M EANING OF L IQUIDATION A company is an artificial person. It is created by law and therefore law alone can dissolve."— Presentation transcript:

1 C OMPANY L IQUIDATION A CCOUNTS

2 M EANING OF L IQUIDATION A company is an artificial person. It is created by law and therefore law alone can dissolve it. On dissolution the company’s name shall be struck off by the Registrar from the register of companies and he shall also get the fact published in the official gazette. Liquidation or winding-up of a company is a process by which dissolution of a company is brought about and its property administered for the benefit of his creditors and members.

3 M EANING OF L IQUIDATION CONTD … An administrator called liquidator is appointed and he takes over the control of the company, collects its assets, pays its debts, and finally distributes the surplus among the members in accordance to their rights. Thus liquidation or winding up ultimately leads to dissolution of a company.

4 M ODES OF W INDING U P Compulsory winding up Voluntary winding up Winding up under the supervision of the court

5 C OMPULSORY W INDING U P Winding up of a company by an order of the court is known as compulsory winding up. According to Section 433 of Companies Act the court may order compulsory winding up under the following circumstances: If the company commits default in holding the statutory meeting If the company fails to commence business within a year of its incorporation or suspends business for a year. If the company is unable to pay its debts If the court is of the opinion that it is just an equitable that the company should be wound up.

6 V OLUNTARY W INDING U P A winding up without any intervention of the court it termed as voluntary winding up. According to section 489 of The Companies Act, a company may be wound up voluntarily: By passing an ordinary resolution in the General Meeting By passing a special resolution to wind up voluntarily for any reason whatsoever.

7 W INDING UP U NDER THE S UPERVISION OF C OURT According to Section 522 of the Companies Act, at any time after the company has passed a resolution for voluntary winding up, the court may make an order that the voluntary winding up shall continue subject to supervision of the court.

8 C ONSEQUENCES OF W INDING U P An official designated as liquidator will take over the administration of the company. The power of the Board of directors will terminate and will now vest with the liquidator. The liquidator will realize the assets of the company and distribute the proceeds among various claimants in the following order: a) Legal charges b) Liquidator’s Remuneration

9 c) Cost of expenses of winding up d) Workmen’s claims and dues e) Preferential creditors f) Creditor’s secured by floating charge g) Unsecured creditors. In case some surplus is still left it will be distributed among the contributories as follows: a) Preference Shareholders b) Equity shareholders

10 S TATEMENT OF AFFAIRS According to Section 454 of the Companies Act, the directors of the company have to submit a statement of affairs of the company within 21 days of passing of the winding up order or appointment of liquidator. The statement should contain the following particulars: - The assets of the company stating separately the cash balance in hand, at bank and negotiable instruments if any held by the company. - Company’s debts and liabilities - Such further or other information as may be prescribed by or as the liquidator may require.

11 S TATEMENT OF AFFAIRS Assets not specifically pledged (as per list ‘A’) Balance at Bank Cash in hand Marketable Securities Bills Receivable Trade Debtors Loans & Advances Unpaid Calls Stock in Trade Work in progress Freehold Property Leasehold Property Plant & Machinery Furniture and Fittings Investments other than marketable securities Other Property etc.

12 S TATEMENT OF A FFAIRS Assets specifically pledged (as per List ‘B’): Assets pledged Estimated Due to Deficiency Surplus Realizable secured Value creditors


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