Meaning of Liquidation
A business can end due to the economic and financial process known as liquidation. In accordance with the company’s insolvency procedure, a company distributes its assets to its claimants when it becomes insolvent. For its general partners, liquidation is a possibility. When a company is liquidated by selling its assets and paying off its debts, it is referred to as a liquidator.
A liquidator can be appointed by an unsecured creditor or shareholder, or a court can order one. Typically, he is in charge of selling assets. A liquidator is a company that is bankrupt or insolvent. The organization’s people, assets, and properties are all under his control.
If the assets have been lost or sold for less than their market value, the liquidator must determine whether they can be recovered.
A company’s process of liquidation:
Under the Insolvency and Bankruptcy Code of 2016, a company can be wound up if it is unable to pay its debts or if it voluntarily agrees to cease operations.
In accordance with the Companies Act of 2013, a company may have to liquidate itself for a variety of reasons other than the inability to pay its debts. The Companies Rules, 2020 (for winding up a company) were made public by the Ministry of Corporate Affairs on January 24, 2020.
Procedures for winding up of company are governed by Companies Act 2013 Section 270.Start with it:
- Totally voluntary, as the Tribunal determined.
- The company was wound up by the tribunal
According to the Companies Act of 1956, a company can be wound up for a variety of reasons. After the company is incorporated, a year or even an entire year may pass. In the Act, the minimum number of members has been reduced:
In addition to the aforementioned grounds for dissolution, the new Companies Act of 2013 includes a number of new ones. Two members in a private company Seven members in a public company
Under the new Companies Act of 2013, a tribunal may have the authority to dissolve a company in the following situations:
Insolvent businesses cannot pay their debts.
The tribunal has made the decision to close the business.
- engaging in activities that damage friendly relations between neighboring or foreign nations or that jeopardize the nation’s integrity, morality, or security.
- For the past five fiscal years, it has not submitted its annual statement.
- Tribunals may find a winding up to be fair and just if it would benefit the business.
- The company, an employee, or a member of the management, is involved in a fraudulent, illegal, or illegal business.
Putting petitions to rest:
Depending on the type of winding up, the petition for winding up must be submitted using one of the prescribed forms 1, 2, or 3 in accordance with section 272.The petition for winding up must be divided into three parts. The company, creditors, contributors, registrars of government-authorized companies, and any other parties that are acceptable can all file the petition.
As part of the filing process, the petition must include a statement of the facts on form 4.All pertinent facts must be stated in the petition by a specific date that cannot be later than 90 days before the statement. A chartered accountant should evaluate the statement after it has been completed. The petition must be advertised in a newspaper in both English and a regional language within 14 days of the hearing date being set.
A voluntary liquidation:
An organization may form voluntarily with the unanimous consent of its members if the following conditions are met:
- If a special resolution is approved, the business may be liquidated.
- A company can be dissolved by a resolution passed by its general meeting if its composition is about to expire before the period specified in its articles of association has expired or if an event occurs in accordance with the articles.
Process of voluntary winding up:
- Two directors must approve a resolution stating that there are no debts in order for the company to use the proceeds from the sale of its assets to settle all outstanding debts.
- The purpose of calling general meetings is to present a resolution with an explanation.
- An ordinary or special resolution requires at least 34% support to wind up a business. The process of winding up will begin once the resolution is approved.
- It is voluntary to wind up the business if the majority believes that doing so is in everyone’s best interest.
- Within ten days of the appointment of a liquidator, the board is obligated to notify the registrar.
- After the resolution is approved, it must be announced in an official publication and published in a newspaper.
- Within thirty days of the date of the general meeting, certified copies of the resolutions must be delivered to the Secretary of State.
- The accounts of the liquidators ought to be prepared and audited after the affairs of the company are concluded.
The company must hold general meetings.
When the company’s affairs have been wound up and it is about to be dissolved, a special resolution must be passed to dispose of books, documents, and other important documents.
Within fifteen days of the dissolution order being passed, the final general meeting must be held.
Within 60 days of receiving the application, the tribunal must issue a dissolution order if all compliance requirements have been met and the accounts are in order.
As soon as the liquidator has completed the order, a copy will be filed with the registrar.
Following the verdict of the tribunal, a notice declaring the company’s dissolution is published by the registrar in the official gazette.