Liquidation of Company Meaning and Problems (Part 1)

Meaning : Liquidation or winding up is a process by which a company is dissolved.

When a company is dissolved a liquidator is appointed who is entrusted with duties such as:
- Selling of the assets of the company
- Paying of its liabilities
- If there is any deficiency to pay to the creditors, the shareholders are called upon to pay the unpaid amount on their shares.
- If there is any surplus after clearing off the liabilities, it may be distributed to the shareholders.
- The Registrar of companies, then removes the name of the company from the register of companies.

Modes of winding up :
1. By the court – compulsory winding up
2. Voluntary winding up
(a) Member’s voluntary winding up
(b) Creditor’s voluntary winding up
3. Winding up subject to supervision of court

Statements and accounts to be prepared :

1. Statement of affairs
2. Deficiency or surplus account

3. Liquidator’s final statement of accounts

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