Company+liquidation+accounts (1)

1. COMPANY LIQUIDATION ACCOUNTS
PRESENTED BY:-
DR. S. V. SHINDE
ASSOCIATE PROFESSOR - D.A.V.
VELANKAR COLLEGE OF COMMERCE,
SOLAPUR.

2. MEANING OF LIQUIDATION
 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. MEANING OF LIQUIDATION 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. MODES OF WINDING UP
 Compulsory winding up
 Voluntary winding up
 Winding up under the supervision of the court

5. COMPULSORY WINDING UP
 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. VOLUNTARY WINDING UP
 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. WINDING UP UNDER THE SUPERVISION OF
COURT
 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. CONSEQUENCES OF WINDING UP
 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. STATEMENT 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. STATEMENT 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. STATEMENT OF AFFAIRS
 Assets specifically pledged (as per List ‘B’):
Assets pledged Estimated Due to Deficiency Surplus
Realizable secured
Value creditors
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