When a company makes the decision to go out of business, it generally cannot simply close its doors the instant it makes that decision. Most businesses have long-term obligations to employees, suppliers and customers as well as landlords and various other parties. A company will have to take time to end these relationships and handle any obligations it has to various stakeholders before it can close its doors.
Winding up is a process whereby all assets of the company are realised and used to pay off the liabilities and members. Dissolution of the company takes place after the entire process of winding up is over. Dissolution puts an end to the life of the company. A dissolution order passed by the court is like the death certificate of the company. As the concept of bankruptcy is not of much relevance in India, for the purposes of this article, the focus is on the concept of winding up.
Liquidation. ************
Once a company has wound up its affairs, it can then sell its remaining assets. Some of these assets, such as remaining inventory, may be liquidated as part of the winding up phase. Others, such as land, buildings and equipment will typically be sold only after the company has completely gone out of business.
Winding up of a company is the process whereby its life is ended and its property is administered for the benefit of its creditors and members. The court appoints an administrator,called a ‘liquidator’, who takes control of the company, takes possession of its assets and finally distributes any surplus among the shareholders in accordance with their respective rights. The objective behind the winding up of a company is to realise the assets, pay off the liabilities and distribute the surplus as expeditiously as possible. Under section 425 of the Act, a company may be wound up in any one of the following three ways:1 (a) by the court2 making a winding-up order (compulsory winding up); (b) by passing of an appropriate resolution for voluntary winding up at a general meeting of members (voluntary winding up); and (c) voluntary winding up subject to supervision of the court.
Voluntary winding up 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 or the creditors.
12 October 2013
Completely agree with Expert Ramesh Ji,
All of those terms refer to the final ending of a business. Liquidation is the sale of all the assets of the business or converting the remaining fixed assets and inventory into cash. Winding up is a more broad term and refers to both liquidation and dissolution.
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