Liquidation : As a result of an economic and financial process called liquidation, a business can come to an end. When a company becomes insolvent, it distributes its assets to its claimants in accordance with the company's insolvency procedure. There is a possibility of liquidation for its general partners. It is called a liquidator when a business is liquidated by realizing its assets and discharging its liabilities by resolving its debts.
Liquidator : An unsecured creditor or shareholder may appoint a liquidator, or a court may order one. He is usually responsible for liquidating assets. An insolvent or bankrupt company is appointed a liquidator. Under his control, the organization's assets, properties, and people are all controlled. He can act in various capacities on behalf of the company. Liquidators have the authority to sell any asset that has equal value on the open market as part of the liquidation process. The liquidator must determine whether the assets are able to be recovered if they have been misplaced or sold for less than their market value.
Liquidation Process of a company : A company can be wound up under the Insolvency and Bankruptcy Code, 2016 when they are unable to make payments on their debts or voluntarily voluntarily agree to wind up their operations. There are a number of reasons why a company may have to liquidate itself, other than the inability to pay its debts, in accordance with the Companies Act, 2013. On the 24th of January 2020, the Ministry of Corporate Affairs notified the Companies Rules, 2020 (for winding up a company) to the public. Companies Act 2013 Section 270 governs winding up procedures. Initiate it: 1. As determined by the Tribunal 2. Totally voluntary.
Tribunal's winding up of the company : There are several grounds for winding up a company under the Companies Act 1956: ● One year or one entire year may pass after the business is incorporated. ●
There is a reduction in the minimum number of members in the Act:
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Two members in a private company Seven members in a Public company
Additionally to the above mentioned grounds for winding up, the new Companies Act, 2013 includes some new ones. In accordance with the new Companies Act 2013, a tribunal may be empowered to wind up a company under the following circumstances: ● ● ● ● ●
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Debts owed by insolvent companies cannot be paid. The tribunal has decided to wind up the company. Participating in activities that compromise the integrity, morality, or security of the nation, or which damage friendly relations between neighboring/foreign nations. It has not filed its annual statement for five consecutive financial years. In the event that a winding up would benefit the company, tribunals may consider it equitable and just. A fraudulent, illegal or illegal business is conducted by the company, or a company employee or management member is involved.
Winding up petitions : As outlined in section 272, the winding up petition must be filed in one of the prescribed forms 1,2, or 3, depending on the type of winding up. Three parts must be included in the winding up petition. There are many parties capable of filing the petition, including the company, creditors, contributors, registrars of companies authorized by the government, or other acceptable parties. A statement of affairs on form number 4 must be filed with the petition as part of the filing process. By a particular date that cannot be more than 90 days before the time of the statement, all relevant facts must be stated in the petition. When the statement is finished, it should be evaluated by an accountant who practices chartered accounting. Within 14 days of setting the hearing date, the petition must be advertised in both English and a regional language in a newspaper.
A voluntary winding up : When the following conditions are met, an organization may wind up voluntarily with the unanimous consent of the members: 1. The company may be wound up if a special resolution is passed. 2. By passing a resolution by its general meeting, a company may be dissolved if its composition is about to expire before the period set out in its articles of association has run out, or in the event of an event that is in accordance with the articles of association.
Voluntary winding-up process : 1. In order to pay all its due debts with the proceeds of its asset sale, two directors must pass a resolution declaring that there are no debts. 2. General meetings must be called for the purpose of presenting a resolution with an explanation. 3. In order to wind up a company, an ordinary or special resolution requires at least 34% support. Upon passing the resolution, the winding up process will begin. 4. If the majority believes that winding up the company is in everyone's best interest, the winding up is voluntary. 5. It is the responsibility of the board to notify the registrar within ten days of the appointment of a liquidator. 6. Once the resolution has been passed, it must be published in a newspaper and notified in an official publication. 7. The Secretary of State must receive certified copies of the general meeting resolutions within 30 days after the meeting date. 8. After a company's affairs are wound up, liquidators' accounts should be prepared and audited. 9. There must be general meetings of the company. 10. For the disposal of books, documents, and other important documents, a special resolution must be passed when all the affairs of the company have been wound up and it is about to be dissolved. 11. The final general meeting must be held within 15 days of the dissolution order to be passed. 12. If all compliance requirements have been met and the accounts are in order, the tribunal shall issue a dissolution order within 60 days of receiving the application. 13. A copy of the order will be filed with the registrar as soon as the liquidator completes it. 14. The registrar publishes in the official gazette a notice declaring the dissolution of the company following the tribunal's ruling.