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Liquidation of Company

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Liquidation of company means end of the life of company. When court orders to liquidate all the assets of it for paying the amount to outside creditors. Court can order only in that case if company is unable to pay its debt or not fulfilling other rules and regulation of govt. or laws. At the time of liquidation, a liquidator is appointed for selling the assets of company and distribute realized money among all the creditors of company.

We all know that company is not human being. I or you will die one day naturally, it is sure due to we are made from five elements of nature and it will absorb in them after our death but life of company can only be dead by winding up process. After winding up or liquidation of company, its name is cut out of register of companies by registrar of companies.

Liquidation Vs Insolvency

Liquidation is different from insolvency. Insolvency applies on sole trade and firms and hufs. But liquidation will apply only company who is unable to repay its debt.

Modes or Methods of Liquidation of Company

1st Mode

Liquidation by Court

Court can liquidate the company if it does not fulfill the terms and conditions of company laws and other laws. In that case, court will order to liquidate the company. Process of liquidation will be completed under the strict supervision of court and anyone who dissatisfy from distribution of fund of company can give the appeal against this action.

2nd Method

Liquidation by Voluntary acceptance

If all the shareholders or creditors who have more money that share capital can bring the resolution of voluntary liquidation of company. They can distribute all funds of company after selling of assets with their acceptance.

Statement of Affairs Account in Liquidation of Company

This statement shows the realization value of companies all assets and liabilities. This difference will be the surplus or deficiency of shareholders.

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Comments

: 2
  1. DR. S.K.GAURJune 20, 2010 at 8:25 AM

    very good. i improve my knowlede through this post.
    thanks

    ReplyDelete
  2. nosferatuDecember 11, 2012 at 11:54 PM

    Tomorrow is my exam and i wanted to know abt modes of liquidation of company. This post has contributed a lot for my preparations. Thank you sir.

    Regards,
    Jatin S. Kumar

    ReplyDelete

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Accounting Education: Liquidation of Company
Liquidation of Company
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