Change in legal Strcuture of Business

Overview

Liquidation of the Company?

Simply put, Liquidation is the process initiated by a company to close its operations. The company may decide to wind up due to various reasons such as unwillingness to continue with the operations, insolvency and so on. As the term suggests, liquidation of a company refers to liquidating the assets of the company. By initiating the liquidation process, the company may sell its assets to meet obligations and repay liabilities. If a company is liquidated due to bankruptcy, the liquidator can sell its assets to repay all pending liabilities. The remaining balance, if any, after repayment to the creditors, gets distributed among the shareholders of the company.

How to Windup a Company?

The winding-up of a company involves a shutdown of all business operations, transactions and selling off all company’s assets to other individuals or entities, to clear off company debts. Once the debts have been cleared off, the remaining assets of the company will be shared among shareholders concerning the capital invested by them The winding-up of the company can be executed in two different ways Compulsory winding up: The compulsory winding up of a company can be executed by the order of a tribunal or a court, bypassing a special resolution made by the directors during the company’s board meeting, which proposes a court intervention. Identically, by filing a petition to a court or a tribunal by any official person of the company, if the company has indulged in any fraudulent/unlawful activities, it can be winded up compulsorily. Voluntarily winding up: The company requires a resolution from the directors, to sell off all assets of the company or to transfer the stakes to another entity.

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What are the benefits of winding up a company?

Free from debts after liquidation: Once the liquidation process is over, the directors and all company officials are free from all creditor liabilities and pressure. Avoiding legal action against the company: If the resolution is passed voluntarily by directors, they will neglect legal action taken by the court or the tribunal, and provide a platform to company directors to concentrate on other business opportunities. Comparingly low cost charged for liquidation: The cost or expenses involved in the liquidation process is relatively low, as charges will be applicable on the sale of assets. All lease agreements will be cancelled: If any company or entity has entered into a lease for a prescribed time, during the liquidation process, it will terminate all the terms and conditions of the lease. If any penalty has to be paid, it will be deducted from the sale of assets. Advantages for creditors: After a prolonged struggle, creditors will benefit from the liquidation process as they will be eligible for a default payment, concerning the proposition of credits given by all creditors

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Our FAQ

Answers To Your Questions

Why is liquidation important?

Liquidation is important for the following reasons- * Once the liquidation process is over, the directors and other company officials are free from all creditor liabilities. * If the company directors pass a voluntary declaration, the company can avoid legal actions from a tribunal or a court. * The cost involved in the liquidation process is comparatively lower than other modes of closure * The creditors are benefited as they will be eligible for default payment from the sale of assets

What causes a company to go into liquidation?

Some of the most prominent causes for a company to go into liquidation are- * Insolvency * Bankruptcy * Unwillingness to continue with business operations

What is the liquidation strategy?

The liquidation strategy refers to liquidating the assets of a company before winding up operations. By initiating the liquidation process, the company may sell its assets to meet obligations and repay liabilities. As a part of the liquidation strategy, a liquidator is appointed to oversee the process of selling the company assets. The remaining balance, if any, after repayment to the creditors, gets distributed among the shareholders of the company

What does liquidation mean for employees?

The liquidation marks the end of business operations by a company and this may lead to the unavoidable loss of jobs for the employees. However, the company administration may look to restructure the organization and save some (or all) of the jobs in the process. But, the employees will have the right to claim dues owed to them by the company.

Do employees get paid when the company goes into liquidation?

If the employer goes into liquidation, there will be no business continuity and the employees will be without a job. However, the employees will have the right to claim dues (salary, allowances, etc) owed to them by the company. If there are no funds with the insolvent company to pay the employees, they can approach the National Insurance Fund (NIF) for payments due.

How long does liquidation of a company take?

In general, the liquidation process of a company in India can take up to 2 years to complete, since the date of application, in case of compulsory liquidation. It may take less time for a voluntary liquidation process to complete. The duration may vary from company to company, depending on the complexity of the process involved.

What happens after the liquidation of a company?

After a company is liquidated, the liquidator can sell its assets to repay all pending liabilities. The remaining balance, if any, after repayment to the creditors, gets distributed among the shareholders of the company.

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