Liqudation of Companies

1. LIQUIDATION
ARUN MOHAN

2. LIQUIDATION
 Liquidation or winding up is a Legal term and refers to the procedure
through which the affairs of the 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 & members. An
Administrator called the Liquidator is appointed and he takes control
of the company, collects its assets , pays its debts & finally distributes
any surplus among the members in accordance with their rights

3. Modes of Liqudation
Two modes of Liqudation are:
 Compulsory Winding up
 Voluntary Winding up

4. Compulsory Winding up
The parties who are entitled by law to petitionfor 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 company itself
 Any creditor
 Contributories: Those shareholders who may be required to contribute to the
company's assets on liquidation
 The Secretary of State (or equivalent)
 The Official Receiver

5. Grounds for Compulsory Winding up:
• The company has so resolved
• The company was incorporated as a corporation, and has not been issued with a
trading certificate (or equivalent) within 12 months of registration
• Default in filing filing financial statement
• It has not commenced business within the statutorily prescribed time (normally
one year) of its incorporation, or has not carried on business for a statutorily
prescribed amount of time
• The number of members has fallen below the minimum prescribed by statute
• The company is unable to pay its debts as they fall due

6. Voluntary liquidation
o A company is wound up by the members or creditors, without any
interference of the national company law tribunal. The members and
creditors are left free to settle their affairs without going to tribunal
Grounds of Voluntary liqudation
• By passing ordinary resolution
• By passing Special resolution
by passing such resolution, shall be advertised in official Gazatte and in
some newspapers circulating in the district of the registred office of the
company