Liquidation

The term liquidation is winding up of a company. It is defined under (Indian companies act 1956). The process whereby the life of the company is ended and its property is administered for the benefit of its creditors and members. It is quite obvious that once the company is started by the members or individuals for a particular purpose. Thane after a certain period of time it needs to be wind up once its object is achieved. Therefore such winding up is also known as liquidation.
However, to wind up the company one needs the help of the legal expertise to deal with liquidation matters where this expertise deals with the liquidation process, they follow the legal procedure to get the company to wind up. Astrea being a legal service firm deals with liquidation matters also where our liquidator takes control of the company takes possession of its assets and finally distributes any surplus among the shareholders by their respective rights. The objective behind the winding up of a company is to realize the assets, pay off the liabilities, and distribute the surplus as expeditiously as possible.
In a legal sense, liquidation derives its name from the process of dissolving or making liquid the assets and liabilities of a company or part of a company. To liquidate is not always synonymous with bankruptcy, as is commonly believed, nor is it always done under duress. Occasionally, companies liquidate an unprofitable segment of their business to create funds for other, more profitable enterprises. Liquidation of a business due to an untenable financial situation falls under two broad categories: compulsory AND voluntary.

What are the types of liquidation/winding up
Under section 425 of the Act, a company may be liquidated/wound up in any one of the following three ways:

(a) by court 2 making a winding-up order (compulsory
winding up);
(b) bypassing of an appropriate resolution for voluntary
winding up at a general meeting of members (voluntary winding up); and
(c) voluntary winding up subject to the supervision of the court.
Compulsory Liquidation
The process of compulsory liquidation begins when a creditor or a company director obtains a court order, sometimes called a “winding-up order,” that forces it to terminate business. In the instance of a company director seeking the court order, it must be done as a joint petition by all company directors if there is more than one.
Creditors typically seek a winding-up order after a statuary demand for payment has not been met either by the question, payment, or dispute. If after 21 days, a statutory order remains without a response, the creditor can receive the court order. In the case of compulsory liquidation by a creditor, the creditor assumes all costs for his actions but is the first creditor considered for payment when liquidation occurs. The winding-up hearing takes place in court. Astrea being a consultancy firm provides consultancy to clients where our expert team looks only at the liquidation matter.
Voluntary Liquidation
In the case of voluntary winding up, the entire process is done without court supervision. When the winding-up is complete, the relevant documents are filed before the court for obtaining the order of dissolution. A voluntary winding up may be done by the members of the creditors. Astrea legal deals in all documentation work where our lawyer helps in filing documents before the court
Insolvent Voluntary proceedings begin with a meeting with a licensed insolvency practitioner with whom a company’s directors work to help them arrange formal meetings with shareholders and creditors. At this meeting, resolutions are passed that appoint the chosen licensed insolvency professional as the company liquidator. The next step is to arrange a meeting with the company’s creditors to avail them of the opportunity to learn why the company has failed and to recommend an alternative liquidator, should they desire. After this meeting, the chosen liquidator assumes full control of the company and its assets. Astrea legal provides satisfactory services regarding voluntary liquidation.
These are just rough outlines regarding voluntary and compulsory liquidation proceedings and should in no way be considered a guide. If you are facing winding-up proceedings, consult Astrea’s professional consultation. We always stand by our clients and provide full guidance to the theme in the matters relating to the liquidation of the company.