4 Liquidation of Company

CA NITIN GOEL LIQUIDATION OF COMPANY
worker
CH
LIQUIDATION OF COMPANY
4
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TOPIC 1.1 INTRODUCTION TO CHAPTER
A company comes into being through a legal process and also comes to an end by law.
Liquidation is the legal procedure by which the company comes to an end.
As per Section 2 (94A) of the Companies Act, 2013, winding up means winding up under this
Act or liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable.
Page 4.1
TOPIC 1.1A MODES OF WINDING UP
COMPULSORY WINDING UP
Circumstances in which Company may be Wound Up by Tribunal [Section 271]
a) The company has resolved that the company be wound up by the Tribunal. The company is
required to pass special resolution.
b) The company has acted against the interests of sovereignty & integrity of India, the security
of the State, friendly relations with foreign States, public order, decency or morality
c) The Registrar or any other person authorised by the Central Government by notification
under this Act can make an application to tribunal. The Tribunal is of the opinion that the
affairs of the company have been conducted in a fraudulent manner or the company was
formed for fraudulent and unlawful purpose or the persons concerned in the formation or
management of its affairs have been guilty of fraud, misfeasance or misconduct in
connection there with and that it is proper that the company be wound up.
d) The company has made a default in filing with the Registrar its financial statements or
annual returns for immediately preceding 5 consecutive financial years.
e) The Tribunal is of the opinion that it is just and equitable that company should be wound up.
Petition for Winding Up (Sec 272)

Petition for Winding Up to Tribunal can be made by
a) The Company
b) Any Contributory or Contributories
c) The registrar
d) Any person authorized by Central Government in that behalf
e) In case affairs of the company have been conducted in a Fraudulent manner, by the Central
Government or a State Government.
VOLUNTARY WINDING UP
UPTIL 31.03.2017
A company may be wound up voluntarily [Section 304]
(a) if the company in general meeting passes a resolution requiring the company to be wound
up voluntarily as a result of the expiry of the period for its duration, if any, fixed by its articles
or on the occurrence of any event in respect of which the articles provide that the company
should be dissolved; or
(b) if the company passes a special resolution that the company be wound up voluntarily.
Page 4.2
FROM 01.04.2017
Section 59 of the Insolvency and Bankruptcy Code, 2016
1) Voluntary liquidation proceedings of a corporate person registered as a company shall
meet the following conditions, namely:
a) Declaration from majority of the directors of the company verified by an affidavit stating
that—
• they have made a full inquiry into the affairs of the company and they have formed an
opinion that either the company has no debt or that it will be able to pay its debts in full
from the proceeds of assets to be sold in the voluntary liquidation; and
• the company is not being liquidated to defraud any person;
b) Declaration shall be accompanied with the following documents, namely:-
• audited financial statements and record of business operations of the company for the
previous 2 years or for the period since its incorporation, whichever is later;
• a report of the valuation of the assets of the company, if any prepared by a registered
valuer;
c) within 4 weeks of a declaration, there shall be—
• a special resolution of the members of the company in a general meeting requiring the
company to be liquidated voluntarily and appointing an insolvency professional to act
as the liquidator; or
• a resolution of the members of the company in a general meeting requiring the company
to be liquidated voluntarily as a result of expiry of the period of its duration, if any, fixed
by its articles or on the occurrence of any event in respect of which the articles provide
that the company shall be dissolved, as the case may be and appointing an insolvency
professional to act as the liquidator:
2) The company shall notify the Registrar of Companies and the Board about the resolution
to liquidate the company
3) Where the affairs of the corporate person have been completely wound up, and its assets
completely liquidated, the liquidator shall make an application to the Adjudicating Authority
for the dissolution of such corporate person.
4) The Adjudicating Authority shall on an application filed by the liquidator, pass an order that
the corporate debtor shall be dissolved from the date of that order and the corporate
debtor shall be dissolved accordingly. A copy of an order shall within 14 days from the date
of such order, be forwarded to the authority with which the corporate person is registered
TOPIC 2: ‘B’ LIST CONTRIBUTORIES
'B' List Contributories under Liquidation of a company

The shareholders who transferred partly paid shares (otherwise than by operation of law or
by death) within one year, prior to the date of winding up may be called upon to pay an amount
(not exceeding the amount not called up when the shares were transferred) to pay off such
creditors as existed on the date of transfer of shares and cannot be paid out of the funds
otherwise available with the liquidator, provided that the existing shareholders have also
failed to pay the amount due on the shares.
Their liability will crystallize only
(i) when the existing assets available with the liquidator are not sufficient to cover the
liabilities;
(ii) when the existing shareholders fail to pay the amount due on the shares to the
liquidator.
Page 4.3
TOPIC 3: LIQUIDATOR’S STATEMENT OF ACCOUNT

The statement prepared by the liquidator showing receipts and payments of cash in case of
voluntary winding up is called “Liquidators’ statement of account”. There is no double entry
involved in the preparation of liquidator’s statement of account. It is only statement presented
in the form of an account. While preparing statement, receipts are shown in following order:
(a) Amount realised from assets are included in the prescribed order.
(b) In case of assets specifically pledged in favour of creditors, only the surplus from it, if
any, is entered as ‘surplus from securities’.
(c) In case of partly paid up shares, the equity shareholders should be called up to pay
necessary amount (not exceeding the amount of uncalled capital) if creditors’
claims/claims of preference shareholders can’t be satisfied with the available amount.
Preference shareholders would be called upon to contribute (not exceeding the amount
as yet uncalled on the shares) for paying of creditors.
(d) Amounts received from calls to contributories made at the time of winding up..
(e) Receipts as per Trading Account are also included on the Receipts side.
Payments made to redeem securities and cost of execution and payments as per Trading
Account are deducted from total receipts. Payments are made & shown in following order:
(a) Legal charges;
(b) Liquidator’s expenses;
(c) Debentureholders (including interest up to the date of winding up if the company is
insolvent and to the date of payment if it is solvent);
(d) Creditors:
a. Preferential (in actual practice, preferential creditors are paid before debenture
holders having a floating charge);
b. Unsecured creditors;
(e) Preferential shareholders (Arrears of dividends on cumulative preference shares should
be paid up to the date of commencement of winding up); and
(f) Equity shareholders.
Page 4.4
Preferencial Payments (Section 327)

In a winding up, subject to the provisions of section 326, there shall be paid in priority to all
other debts-
Page 4.5
a) all revenues, taxes, cesses and rates due from the company to the Central Government or
a State Government or to a local authority at the relevant date, and having become due and
payable within the twelve months immediately before that date;
b) all wages or salary including wages payable for time or piece work and salary earned
wholly or in part by way of commission of any employee in respect of services rendered to
the company and due for a period not exceeding four months within the twelve months
immediately before the relevant date, subject to the condition that the amount payable
under this clause to any workman shall not exceed such amount as may be notified;
c) all accrued holiday remuneration becoming payable to any employee, or in the case of his
death, to any other person claiming under him, on the termination of his employment
before, or by the winding up order, or, as the case may be, the dissolution of the company;
d) unless the company is being wound up voluntarily merely for the purposes of
reconstruction or amalgamation with another company, all amount due in respect of
contributions payable during the period of twelve months immediately before the relevant
date by the company as the employer of persons under the Employees’ State Insurance
Act, 1948 or any other law for the time being in force;
e) unless the company has, at the commencement of winding up, under such a contract with
any insurer as is mentioned in section 14 of the Workmen’s Compensation Act, 1923, rights
capable of being transferred to and vested in the workmen, all amount due in respect of
any compensation or liability for compensation under the said Act in respect of the death
or disablement of any employee of the company:
k) all sums due to any employee from the provident fund, the pension fund, the gratuity fund
or any other fund for the welfare of the employees, maintained by the company; and
l) the expenses of any investigation held in pursuance of sections 213 and 216, in so far as
they are payable by the company.
Page 4.6
TOPIC 4A: STATEMENT OF AFFAIRS

FORMAT OF STATEMENT OF AFFAIRS
Particulars Estimated
Realisable
Value
Assets not specifically pledged (List A)
Debtors
Bills Receivable
Stock
Furniture & Fixtures
Cash in hand
Calls in Arrears
Estimated value of assets not specifically pledged
Assets specifically pledged (List B)
Particulars Est. Real. Due to Deficiency Surplus carried
Value secured ranking as to last column
creditors unsecured
Estimated total assets available for preferential creditors, debenture holders

secured by a floating charge and unsecured creditors
Summary of Gross Assets
Estimated Realizable value of assets specifically pledged
Estimated Realizable value of assets not specifically
pledged
Total Assets
Page 4.7
Liabilities
Gross Liabilities
Liabilities
Secured creditors (as per List B) to the extent to which
claims are estimated to be covered by assets specifically
pledged
Preferential creditors (as per List C)
Balance of assets available for debenture holders secured
by floating charge and unsecured creditors
Debenture holders secured by floating charge (as per List D)
Balance of assets available for unsecured creditors
Unsecured creditors (as per List E)
Estimated surplus/ deficiency as regards creditors
(difference between gross assets and gross liabilities)
____ Preference shares of ₹__ each (as per List F)
_____ Equity shares of ₹___ each(as per List G)
Estimated surplus/ deficiency as regards members
(as per List H)
Note:
1) The above is subject to cost of winding up and to any surplus / deficiency on realisation of
assets.
2) There are ___ shares unpaid @ ₹ ___ per share liable to be called up or there are no calls
in arrears.
TOPIC 4B: DEFICIENCY ACCOUNT
DEFICIENCY ACCOUNT (List H)

A. Item contributing to Deficiency
1. Excess of capital & liabilities over assets
2. Net dividend & bonuses during the period
3. Net trading losses after charging depreciation, taxation, interest on
debentures, etc. during the same period
4. Losses other than trading losses written off or for which provision
has been made in the books during period
5. Estimated losses now written off or for which provision has been
made for the purpose of preparing the statement
6. Other items contributing to deficiency
B. Items reducing Deficiency
7. Excess of assets over capital & liabilities on ______
8. Net trading profit during the period
9. Profit & Incomes other than trading profit during the same period
10. Other items
Surplus/ Deficiency as shown by the Statement of Affairs (A) - (B)
Page 4.8
TOPIC 5: OVERRIDING PREFERENTIAL PAYMENTS

Overriding Preferential Payments (Section 326)
(1) In the winding up of a company under this Act, the following debts shall be paid in priority
to all other debts:
a. workmen’s dues; and
b. where a secured creditor has realised a secured asset, so much of the debts due to such
secured creditor as could not be realised by him or amount of workmen’s portion in his
security (if payable under the law), whichever is less, pari passu with the workmen’s dues:
Provided that in case of the winding up of a company, the sums referred to in sub-clauses (i)
and (ii) of clause (b) of the Explanation, which are payable for a period of two years preceding
the winding up order or such other period as may be prescribed, shall be paid in priority to
all other debts (including debts due to secured creditors), within a period of thirty days of sale
of assets and shall be subject to such charge over the security of secured creditors as may
be prescribed.
(2) The debts payable under the proviso to sub-section (1) shall be paid in full before any
payment is made to secured creditors and thereafter debts payable under that subsection
shall be paid in full, unless the assets are insufficient to meet them, in which case they shall
abate in equal proportions
Explanation. For the purposes of this section, and section 327—

a. “workmen”, in relation to a company, means the employees of the company, being workmen
within the meaning of section 2(s) of the Industrial Disputes Act, 1947.
b. “workmen’s dues”, in relation to a company, means the aggregate of the following sums
due from the company to its workmen, namely:—
(i) all wages or salary including wages payable for time or piece work and salary earned
wholly or in part by way of commission of any workman in respect of services rendered
to the company and any compensation payable to any workman under any of the
provisions of the Industrial Disputes Act, 1947 (14 of 1947);
(ii) all accrued holiday remuneration becoming payable to any workman or, in the case of
his death, to any other person in his right on the termination of his employment before
or by the effect of the winding up order or resolution;
(iii) unless the company is being wound up voluntarily merely for the purposes of
reconstruction or amalgamation with another company or unless the company has, at
the commencement of the winding up, under such a contract with insurers as is
mentioned in section 14 of the Workmen’s Compensation Act, 1923 (19 of 1923), rights
capable of being transferred to and vested in the workmen, all amount due in respect of
any compensation or liability for compensation under the said Act in respect of the death
or disablement of any workman of the company;
(iv) all sums due to any workman from the provident fund, the pension fund, the gratuity fund
or any other fund for the welfare of the workmen, maintained by the company;
c. “workmen’s portion”, in relation to the security of any secured creditor of a company,
means the amount which bears to the value of the security the same proportion as the
amount of the workmen’s dues bears to the aggregate of the amount of workmen’s dues
and the amount of the debts due to the secured creditors.
Page 4.9
ASSIGNMENT QUESTIONS
Question 1 (ICAI Study Material) Pg no._____

In a liquidation which commenced on April 2, 2021 certain creditors could not receive
payments out of the realization of assets & out of the contributions from “A” list contributories.
The following are the details of certain transfers, which took place in 2020 and 2021.
Shareholders Number of shares Date of Creditors
transferred at the date of ceasing to be remaining unpaid
ceasing to be member member & outstanding
X 1,500 1 March 2020
st
4,000
A 1,000 1st May 2020 6,000
B 1,500 1 July 2020
st
7,500
C 300 1 Nov 2020
st
8,000
D 200 1 Feb. 2021
st
9,500
All the shares were ₹ 10 each, ₹ 6 paid up ignoring expenses of and remuneration to
liquidators, etc., show the amount to be realised from the various persons listed above.
Question 2 (Inter Jan 2021) (10 Marks) / (ICAI Study Material) Pg no._____
In the winding up of a company, certain Creditors could not receive payments out of the
realization of assets and out of contribution from "A" list contributories. Liquidation started
on 1st April, 2020. The following persons have transferred their holdings before winding up:
Shareholders No. of shares Date of Amoutn due to creditors on the
transferred Transfer date of such transfer
O 1,000 04.04.2019 42,000
P 300 02.02.2019 25,000
Q 200 08.09.2019 57,000
R 1,400 11.11.2019 85,000
S 800 02.02.2020 66,000
T 1,400 01.03.2020 95,000
The shares were of ₹ 100 each, ₹ 70 being called up and paid up on the date of transfers. 'X'
was the transferee of shares held by S. 'X' paid ₹ 30 per share as calls in advance immediately
on becoming a member. Ignoring Expenses of Liquidation, Remuneration of Liquidator, etc.
work out the amount to be realized from the above contributories
Question 3 (Inter Nov 2020) (5 Marks) Pg no._____

In a winding up of a company creditor remain unpaid. The following persons had transferred
their holdings before winding up.
Shareholders Number of Date of Transfer Creditors remaining unpaid &
shares outstanding on the date of such
transferred transfer
D 1000 01.01.2019 8,500
E 400 15.02.2019 13,500
H 700 15.03.2019 19,000
J 900 31.03.2019 22,000
K 1000 05.04.2019 31,000
Page 4.10
The shares were of ₹ 100 each, ₹ 80 being called up and paid up on the date of transfers.
(1) A member G, who holds 200 shares died on 28th Feb., 2019 when the amount due to
creditors was ₹ 16000. His shares were transmitted to his Son X.
(2) R was the transferee of shares held by J. R paid ₹ 20 per share as calls in advance
immediately on becoming a member.
(3) The liquidation of the Company commenced on 1st February, 2020. Then the liquidator
made a call on the present and past contributories to pay the amount.
You are required to quantify the maximum liability of the transferors of shares mentioned in
the above table.
Solution
Statement showing the liability of ‘B’ list contributories
Name Date Unpaid Incremental 400 200 700 1000 Total
Debt E G/X H K
E 15/02/2019 13,500 13,500 2,348 1,174 4,108 5,870 13,500
G/X 28/02/2019 16,000 2,500 - 263 921 1,316 2,500
H 15/03/2019 19,000 3,000 - 316 1,105 1,579 3,000
K 05/04/2019 31,000 12,000 - 2,000 - 10,000 12,000
Total (A) 2,348 3,753 6,134 18,765 31,000
Maximum Liability (B) 8,000 4,000 14,000 20,000
Actual liability 2,348 3,753 6,134 18,765
(Lower of A & B)
Working Note:
(1) The transferors are D, E, H, J and K. When the transferees pay the amount due as “present”
member contributories, there will not be any liability on the transferors. It is only when the
transferees do not pay as “present” member contributories then the liability would arise in the
case of “past” members as contributories.
(2) D will not be liable to pay any amount as the winding up proceedings commenced after one
year from the date of the transfer.
(3) J also will not be liable as the transferee R has paid the balance ₹ 20 per share as call in
advance.
(4) E, G/X, H and K will be liable, as former members, to the maximum extent as indicated,
provided the transferees do not pay the calls.
(5) X to whom shares were transmitted on demise of his father G would be liable as an existing
member contributory. He steps into the shoes of his deceased father. His maximum liability
would be at ₹ 20 per share on 200 shares received on transmission i.e. for ₹ 4,000.

A company went into liquidation whose creditors are ₹ 36,000. This amount of ₹ 36,000
includes ₹ 6,000 on account of wages of 15 men at ₹ 100 per month for 4 months, immediately
before the date of winding up, ₹ 9,000 being the salaries of 5 employees at ₹ 300 per month
for the previous 6 months, Rent for godown for the last six months amounting to ₹ 3,000;
Income-tax deducted out of salaries of employees ₹ 1,000. In addition it is estimated that the
company would have to pay ₹ 3,000 as compensation to an employees for injuries suffered
by him, which was contingent liability not accepted by the company and not included in above
said creditors figure. Find the amount of Preferential Creditors.
Page 4.11

Prakash Processors Ltd. went into voluntary liquidation on 31st December, 2019 when their
Balance Sheet read as follows:
Liabilities ₹
Issued and Subscribed Capital:
5,000 10% Cumulative Preference Shares of ₹ 100 each, fully paid 5,00,000
2,500 Equity Shares of ₹ 100 each, ₹ 75 paid 1,87,500
7,500 Equity Shares of ₹ 100 each, ₹ 60 paid 4,50,000
15% Debentures secured by a floating charge 2,50,000
Interest outstanding on Debentures 37,500
Creditors 3,18,750
Total 17,43,750
Assets
Land & Building 2,50,000
Machinery & Plant 6,25,000
Patents 1,00,000
Stock 1,37,500
Trade Receivables 2,75,000
Cash at Bank 75,000
Profit & Loss Account 2,81,250
Total 17,43,750
Preference dividends were in arrears for 2 years & creditors included Preferential Creditors
of ₹ 38,000. The assets realized as follows: Land and Building ₹ 3,00,000; Machinery and
Plant ₹ 5,00,000; Patents ₹ 75,000; Stock ₹ 1,50,000; Trade receivables ₹ 2,00,000.
The expenses of liquidation amounted to ₹ 27,250. The liquidator is entitled to a commission
of 3% on assets realized except cash. Assuming the final payments including those on
debentures is made on 30th June, 2020 show the Liquidator’s Statement of Account.
Question 6 (RTP May 2022) Pg no._____

Balance Sheet of Cloud Ltd., as at 31st March, 2021, being the date of voluntary winding up:
Particulars Note Amount (₹)
I Equity and Liabilities
1 Shareholders’ Funds:
(a) Share Capital 1 21,00,000
(b) Reserve and Surplus 2 4,00,000
2 Non-Current Liabilities:
(a) Long Term Borrowings 3 4,20,000
3 Current Liabilities:
(a) Short Term Borrowings 4 9,70,000
(b) Trade Payables 12,00,000
(c) Other Current Liabilities 5 2,10,000
Total 53,00,000
II Assets
1 Non-Current Assets:
(a) Property, Plant and Equipment 6 26,00,000
2 Current Assets:
(a) Inventories 6,50,000
Page 4.12
(b) Trade Receivables 20,50,000

(c) Cash and Cash Equivalents -
Total 53,00,000
Notes to Accounts :
Particulars Amount (₹)
1. Share Capital
Authorized:
10,000 Equity Shares of ₹ 100 each 10,00,000
10,000 Equity Shares of ₹ 100 each 10,00,000
10,000, 10% Cumulative Preference Shares of ₹ 100 each 10,00,000
Issued, Subscribed & Paid up:
10,000 Equity Shares of ₹ 100 each, ₹ 60 paid up. 6,00,000
10,000 Equity Shares of ₹ 100 each, ₹ 50 paid up. 5,00,000
10,000, 10% Cumulative Preference Shares of ₹ 100 each, fully paid up. 10,00,000
Total 21,00,000
2. Reserve and Surplus
(a) Securities Premium 15,00,000
(b) Profit & Loss A/c (Dr. balance) (11,00,000)
4,00,000
3. Long Term Borrowings
10% Debentures 4,20,000
4. Short Term borrowings
Bank Overdraft (unsecured) 9,70,000
5. Other Current Liabilities
Preferential Creditors 2,10,000
6. Property, Plant and Equipment
Land and Buildings 10,40,000
Plant and Machinery 15,60,000
Total 26,00,000
Preference Dividend is in arrears for 3 years (upto 31st March, 2021). Assets realized as:
Land & Building ₹ 12,40,000 Plant & Machinery ₹ 14,20,000
Inventory ₹ 6,20,000 Trade receivables ₹ 13,20,000
Expenses of Liquidation are ₹ 1,72,000. The Remuneration of the Liquidator is 2% of the
realization of assets. Income Tax Payable is ₹ 1,34,000. Interest on debentures for the year
ended 31st March, 2021 has not been considered in the given balance sheet and is also to be
paid. Prepare the Liquidator’s Final Statement of Account.
Question 7 Pg no._____
Raghu Ltd. went into voluntary liquidation on 31 March,2020 when Balance Sheet read as:
st
Liabilities ₹
Issued and subscribed capital :
2,500 equity shares of ₹ 100 each, ₹ 75 paid 1,87,500
5,000 6% cumulative preference shares of ₹ 100 each, fully paid 5,00,000
Reserve and Surplus
Profit & Loss Account (4,10,000)
Non –Current Liabilities
5% Debentures (secured by a floating charge on all assets) 2,50,000
Page 4.13
Current Liabilities
Short term borrowings- Bank overdraft 1,00,000
Trade payables(unsecured) 2,25,000
Interest due on Debentures 12,500
Taxes due to Government within 12 months 12,500
Salaries and wages to workers due for 4 months 60,000
13,87,500
Assets
Tangible assets
Land 50,000
Building 2,00,000
Machinery and Plant 6,25,000
Current assets
Inventories 1,37,500
Trade receivables 2,75,000
Cash and cash equivalents 1,00,000
13,87,500
Other information:
1. Bank overdraft is secured by deposit of title deed of land & building which realised 3,00,000.
2. The assets realised as follows:
Machinery and Plant ₹ 5,00,000;
Inventories ₹ 1,50,000;
Trade receivables ₹ 2,00,000
3. Preference dividends were in arrears for 2 years.
4. Expenses of liquidation amounted to ₹ 57,250.
5. The liquidator is entitled to a commission of 5% on all assets realised except cash and 1%
on the amount distributed to Trade payables.
6. Liquidator realised all assets on above date & discharged his obligation on the same date.
Prepare liquidator’s Statement of Account.
Question 8 (ICAI Study Material) / (RTP May 2019 /RTP Nov 2020) Pg no._____
The following is the Balance Sheet of Omega Ltd. which is in the hands of the liquidator:
Balance Sheet as at 31.03.2020
Liabilities ₹ Assets ₹
Share Capital: Property, Plant & Equipment 2,00,000
1,000 6% Preference Shares of ₹ 100 1,00,000 Inventory 1,20,000
each fully paid
2,000 Equity shares of ₹ 100 each 2,00,000 Trade Receivables 2,40,000
fully paid
2,000 Equity shares of ₹ 100 each ₹ 1,50,000 Cash in hand 40,000
75 paid up
Loan from bank (on security of stock) 1,00,000 Profit and loss account 3,00,000
Trade Payables 3,50,000
Total 9,00,000 Total 9,00,000
The assets realized the following amounts (after all costs of realization and liquidator’s
commission amounting to ₹ 5,000 paid out of cash in hand).
Property, Plant & Equipment 1,68,000
Inventory 1,10,000
Page 4.14

Calls on partly paid shares were made but the amounts due on 200 shares were found to be
irrecoverable. Prepare Liquidator’s Final Statement of Receipts and Payments.
Pg no._____
Question 9
The following particulars relate to a V Limited Company which has gone into voluntary
liquidation. You are required to prepare the Liquidator’s Statement of Account allowing for
his remuneration @ 2½% on all assets realized excluding call money received and 2% on the
amount paid to unsecured creditors including preferential creditors.
Share capital issued:
5,000 Preference shares of ₹ 100 each fully paid up.
25,000 Equity shares of ₹ 10 each fully paid up.
15,000 Equity shares of ₹ 10 each, ₹ 8 paid up.
Assets realized ₹ 10,00,000 excluding the amount realized by sale of securities held by partly
secured creditors.
Preferential creditors 25,000
Unsecured creditors 9,00,000
Partly secured creditors (Assets realized ₹ 1,60,000) 1,75,000
Debentureholders having floating charge on all assets of the company 3,00,000
Expenses of liquidation 5,000
A call of ₹ 2 per share on the partly paid equity shares was duly received except in case of
one shareholder owning 500 shares. Also calculate the percentage of amount paid to the
unsecured creditors to the total unsecured creditors.
X Ltd. went into voluntary liquidation. The liquidator is entitled for remuneration @ 5% of the
amount paid to unsecured creditors. Amount available for distribution before paying
unsecured creditors is ₹ 2,10,000 and amount payable to unsecured creditors is ₹ 3,50,000.
Calculate the amount of remuneration of liquidator & amount paid to unsecured creditors.
The liquidator of a company is entitled to a remuneration of 2% on assets realized and 3% on
the amount distributed to unsecured creditors. The assets realized ₹10,00,000. Amount
available for distribution to unsecured creditors before paying liquidator’s remuneration is
₹4,12,000. Calculate liquidator’s remuneration if surplus is insufficient to pay off unsecured
creditors.
A Liquidator is entitled to receive remuneration at 2% on the assets realized, 3% on the amount
distributed to Preferential Creditors and 3% on the payment made to Unsecured Creditors.
The assets were realized for ₹ 25,00,000 against which payment was made as follows:
Liquidation Expenses ₹ 25,000
Secured Creditors ₹ 10,00,000
Preferential Creditors ₹ 75,000
The amount due to Unsecured Creditors was ₹ 15,00,000. You are asked to calculate the total
Remuneration payable to Liquidator. Calculation shall be made to nearest multiple of a rupee.
Question 13 (RTP May 2021) (Similar) Pg no._____

From Trial Balance of PQ Ltd. on 31.12.2019, prepare liquidators’ final statement of account:
Page 4.15
Particulars ₹ ₹
9% Preference share capital - 1,25,000
(1,250 Preference shares @ ₹100 each fully paid up)
Equity share capital:
2,000 Equity shares @ ₹100 each fully paid up - 2,00,000
2,000 Equity shares @ ₹100 each, ₹50 paid up - 1,00,000
Plant 3,00,000 -
Stock-in-trade 3,60,000 -
Sundry debtors 85,000 -
Sundry creditors - 2,21,000
Bank balance 1,20,000 -
Preliminary expenses 6,000 -
6% Mortgage loan - 2,30,000
Outstanding liabilities for expenses - 25,000
Profit & loss A/c (Trading loss for the year 2019) 30,000 -
9,01,000 9,01,000
Following points should be kept in mind:
1. On 21st January, 2020 the liquidator of PQ Ltd. sold plant for ₹2,95,000 and stock in
trade at 10% less than the book value. He realised 80% of Sundry debtors and incurred
cost of collection of ₹1,850 (remaining debtors are to be treated as bad).
2. Loan mortgage was discharged on 31st January, 2020 along with interest for 6 months.
Creditors were discharged subject to 5% discount. O/s expenses paid at 20% less.
3. Preference share dividend is due for one year and paid with final payment
4. Liquidation expenses incurred are ₹1,800 & liquidators’ remuneration is settled at 4%
on disbursement to members (excl. preference dividend), subject to minimum of 10,000

X Ltd. resolved on 31st December 2019 that the company be wound up voluntarily. The
following was the trial balance extracted from its books as on that date:
Particulars ₹ ₹
Equity shares of ₹ 10 each 2,00,000
9% Preference shares of ₹ 10 each 1,00,000
Plant (less depreciation w/o ₹ 85,000) 2,15,000
Stock in trade 2,50,000
Trade receivables 55,000
Trade payables 75,000
Bank balance 74,000
Preliminary Expenses 6,000
Profit & Loss A/c (balance on 1st January, 2019) 30,000
Trading loss for the year 2019 24,000
Preference dividend for the year 2019 6,000
Outstanding Expenses (including mortgage interest) 25,000
4% Mortgage loan (secured by floating charge) 2,00,000
Total 6,30,000 6,30,000
On 1st January, 2020 the liquidator sold to M. Ltd Plant for ₹ 2,05,000 and stock in trade for
₹ 2,00,000. The sale was completed in January, 2020 and the consideration satisfied as to
₹ 2,62,200 in cash and as to the balance in 6% Debentures of the purchasing company issued
to the liquidator at a premium of 2%. The remaining steps in the liquidation were as follows:
(i) Liquidator realized ₹ 52,000 out of book debts & cost of collection amounted to ₹ 2,000.
Page 4.16
(ii) The loan mortgage was discharged on 31st January, 2020 along with interest from
31stJuly, 2019. Creditors were discharged subject to 2% & outstanding expenses excluding
mortgage interest were settled for ₹ 2,000.
(iii) On 30th June 2020 six month’s interest on debentures was received from M. Ltd.
(iv) Liquidation expenses amounting to ₹ 3,000 &liquidator’s remuneration of 3% on
disbursements to members were paid on 30th June, 2020 when:
a. The preference shareholders were paid out in cash and
b. Debentures of M. Ltd. & balance cash were distributed ratably among equity shareholder
Prepare the Liquidator’s Statement of Account showing the distribution.
Question 15 (RTP May 2018 / RTP Nov 2021) / (ICAI Study Material) Pg no._____
The position of Careless Ltd. on its liquidation is as under:
• 5,000, 10% Preference Shares of ₹ 100 each ₹ 60 paid up
• 2,000, Equity shares of ₹ 75 each, ₹ 50 paid up
• Unsecured Creditors ₹ 99,000
• Liquidation Expenses ₹ 1,000
• Liquidator entitled to 2% commission on amount realized from call made on contributories
Prepare Liquidator’s Statement of Account if total assets realized ₹ 3,80,400
The position of Valueless Ltd. on its liquidation is as under: Issued and paid up Capital:
3,000 11% preference shares of ₹ 100 each fully paid.
3,000 Equity shares of ₹ 100 each fully paid.
1,000 Equity shares of ₹ 50 each ₹ 30 per share paid.
Calls in Arrears are ₹ 10,000 and Calls received in Advance ₹ 5,000. Preference Dividends
are in arrears for one year. Amount left with the liquidator after discharging all liabilities is
₹ 4,13,000. Articles of Association of the company provide for payment of preference dividend
arrears in priority to return of equity capital. Prepare Liquidators final statement of account.

Wind Ltd. went into liquidation on 31st March, 2021. Following details regarding share capital
of the company:
I. 15,000 Equity shares of ₹ 100 each, ₹ 90 paid up.
II. 40,000 Equity shares of ₹ 50 each, ₹ 25 paid up.
III. 2,00,000 Equity shares of ₹ 10 each, fully paid up.
Surplus available with the liquidator after payment of all the liabilities ₹ 12,00,000. Distribute
this surplus money among different categories of shareholders.

The following is the Balance Sheet of Confidence Builders Ltd., as at 30thSept. 2019:
Share Capital:- Land and Buildings 1,20,000
Issued : 11% Pref. Shares of ₹ 10 each 1,00,000 Sundry Current Assets 3,95,000
10,000 equity shares of ₹ 10 each, 1,00,000 Profit & Loss Account 38,500
fully paid up
5,000 equity shares of ₹ 10 each, 37,500 Debenture Issue expenses 2,000
₹ 7.50 per share paid up not written off
Mortgage Loan 80,000
Page 4.17
Bank Overdraft 30,000

Creditors for Trade 32,000
Income-tax Arrears :
(assessment concluded in July 2019)
A.Y. 2017-18 : 21,000
A.Y. 2018-19 : 5,000 26,000
5,55,500 5,55,500
• Mortgage loan was secured against land and buildings. Debentures were secured by a
floating charge on all the other assets.
• The company was unable to meet the payments and therefore the debenture holders
appointed a Receiver for the Debenture holders.
• He brought the land and buildings to auction and realized ₹ 1,50,000. He also took
charge of Sundry assets of value of ₹ 2,40,000 and realized ₹ 2,00,000.
• The Bank Overdraft was secured by a personal guarantee of two of the Directors of the
Company and on the Bank raising a demand, the Directors paid off the due from their
personal resources.
• Costs incurred by the Receiver were ₹ 2,000 and by the Liquidator ₹ 2,800.
• The Receiver was not entitled to any remuneration but the liquidator was to receive 3%
fee on the value of assets realized by him.
• Preference shareholders had not been paid dividend for period after 30th September
2017 and interest for the last half year was due to the debenture holders.
• Rest of the assets were realized at ₹ 1,00,000.
Prepare the accounts to be submitted by the Receiver and Liquidator.

X Co. Ltd. went into voluntary liquidation on 1st April, 2020. The following balances are
extracted from its books on that date:
24,000 Equity Shares of ₹ 10 each 2,40,000 Machinery 90,000
Debentures (Secured by Floating 1,50,000 Leasehold Properties 1,20,000
charge)
Bank Overdraft 54,000 Stock 3,000
Creditors 60,000 Debtors 1,50,000
Investments 18,000
Cash in Hand 3,000
P&L A/c 1,20,000
Total 5,04,000 Total 5,04,000
The following assets are valued as under:

Machinery 1,80,000
Leasehold Properties 2,18,000
Investments 12,000
Stock 6,000
Debtors 1,40,000
The bank overdraft is secured by deposit of title deeds of leasehold properties. There were
preferential creditors amounting ₹ 3,000 which were not included in creditors ₹ 60,000.
Prepare a Statement of Affairs to be submitted to the meeting of members/creditors.
Page 4.18

Insol Ltd. is to be liquidated. Summarised Balance Sheet as at 30th Sept, 2019 appears as:
Liabilities ₹
2,50,000 equity shares of ₹ 10 each 25,00,000
Secured debentures (on land and buildings) 10,00,000
Unsecured loans 20,00,000
Trade Creditors 35,00,000
Total 90,00,000
Assets
Other Fixed Assets 20,00,000
Current Assets 45,00,000
Total 90,00,000
Contingent Liabilities are:-
For bills discounted 1,00,000
For excise duty demands 1,50,000
On investigation, it is found that the contingent liabilities are certain to devolve and that the
assets are likely to be realized as follows:—
Other Fixed Assets 18,00,000
Taking the above into account, prepare the Statement of Affairs.

X Ltd. was ordered to be wound up on 31st March 2020 on which date its balance sheet was as
Capital:10,000 shares of ₹ 100 each 10,00,000 Goodwill 1,00,000
Interest Accrued 4,000 1,64,000 Building 3,50,000
(Sec. by Floating charge on all assets)
Bank Overdraft
Plant 5,50,000
(Secured by hypothecation of stock) 25,000
Trade Payables 36,000 Fixtures 23,000
Stock 38,000
Debtors 25,000
Cash 500
P&L A/c 1,38,500
Total 12,25,000 Total 12,25,000
The amounts estimated to be realized are: Goodwill ₹ 1,000; Building ₹3,00,000; Plant
₹ 5,25,000; Fixtures ₹ 10,000; Stock ₹ 31,000; Debtors ₹ 20,000.
Creditors included ₹ 6,000 on account of wages of 15 men at ₹ 100 per month for 4 months
immediately before the date of winding up: ₹ 9,000 being the salaries of 5 employees at ₹ 300
per month for the previous 6 months; Rent for godown for the last six months amounting to
₹ 3,000; Income-tax deducted out of salaries of employees ₹ 1,000 and Directors Fees ₹ 500.
Page 4.19
Three years ago, the debit balance in the Profit and Loss Account was ₹ 77,925 and since that
date the accounts of the company have shown the following figures:
Year 31-03-2018 Year 31-03-2019 Year 31-03-2020
Gross Profit 65,000 45,000 40,000
Wages & Salaries 40,500 36,000 34,400
Electricity & Water Tax 5,750 6,380 5,260
Debentures Interest 8,000 8,000 8,000
Bad Debts 8,540 7,600 6,700
Depreciation 6,700
Director’s fees 1,000 1,000 1,000
Miscellaneous expenses 10,500 7,265 7,980
Total 80,990 66,245 63,340
In addition it is estimated that the company would have to pay ₹ 5,000 as compensation to an
employee for injuries suffered by him which was contingent liability not accepted by the
company.
Prepare the Statement of Affairs and the Deficiency Account.

From following particulars, prepare Statement of Affairs & Deficiency Account for submission
to the official liquidator of Equipment Ltd., which went into liquidation on Dec 31, 2020:
Liabilities ₹ ₹
3,000 equity shares of 100 each, ₹ 80 paid-up 2,40,000
6% 1,000 preference shares of ₹ 100 each fully paid-up 1,00,000
Less: Calls in arrear (5,000) 95,000
5% Debentures having a floating charge on the assets (interest 1,00,000
paid upto June 30, 2020)
Mortgage on Land & Buildings 80,000
Owing for wages 20,000
Secretary’s salary (@ ₹ 500 p.m.) owing 3,000
Managing Director’s salary (@ ₹ 1,500 p.m.) owing 6,000
Assets Estimated to Book Value
Produce
Land & Building 1,30,000 1,20,000
Plant 1,30,000 2,00,000
Tools 4,000 20,000
Patents 30,000 50,000
Stock 74,000 87,000
Investments in hands of Bank for overdraft of ₹ 1,90,000 1,70,000 1,80,000
Book Debts 60,000 90,000
On 31st December, 2015 the Balance Sheet of the company showed a general reserve of
₹ 40,000 accompanied by a debit balance of ₹ 25,000 in the Profit & Loss Account.
In 2016 the company made a profit of ₹ 40,000 and declared a dividend of 10% on equity shares.
The company suffered a total loss of ₹ 1,09,000 besides loss of stock due to fire of ₹ 40,000
during 2017, 2018 and 2019. For 2020 accounts were not made. The cost of winding up is
expected to be ₹ 15,000.
Page 4.20

XYZ Limited is being wound up by tribunal. All the assets of the company have been charged
to the company’s bankers to whom the company owes ₹ 5 crores. The company owes
following amount to others:
(a) Dues of workers: ₹ 1,25,00,000
(b) Taxes payable to Government ₹ 30,00,000
(c) Unsecured Creditors ₹ 60,00,000
You are required to compute with the reference to the provisions of Companies Act, 2013 the
amount each kind of creditors is likely to get if the amount realized by the official liquidator
from the secured assets & available for distribution among creditors is only ₹ 4,00,00,000.

Amounts payable in winding-up of a company are as follows:
- Secured Creditors ₹ 1,25,000
- Workmen's Due ₹ 2,50,000
Show the payments made and treatment of balance in the following two instances:
a) If the security realized is ₹ 2,00,000
b) If the security realized is ₹ 1,00,000
Page 4.21
PRACTICE QUESTIONS
Question 1 (RTP Nov 2018) Pg no._____

Liquidation of YZ Ltd. commenced on 2nd April, 2020. Certain creditors could not receive in
2019 and 2020:
Shareholders Number of shares Date of Creditors remaining unpaid &out-
transferred ceasing to be standing on the date of such
member transfer
A 2,000 1 March 2019
st
5,000
P 1,500 1st May 2019 3,300
Q 1,000 1 Oct 2019
st
4,300
R 500 1 Nov 2019
st
4,600
S 300 1 Feb. 2020
st
6,000
All the shares were of ₹ 10 each, ₹ 8 per share paid up. Show the amount to be realized from
the various persons listed above ignoring expenses and remuneration to liquidator etc
(Ans: Liability P:1,500; Q:1,555; R:965; S:600)
Question 2 (Inter May 2018) (5 Marks) Pg no._____
In a liquidation which commenced on 11th November, 2019 certain creditors could not receive
payments out of the realization of assets and out of the contributions from "A" list
contributories. The following are details of certain transfer, which took place in 2018 and 2019:
Share Number of shares Date of ceasing to be Creditors remaining
holders transferred at the date of member unpaid and
ceasing to be member outstanding
C 2,500 1st September, 2018 5,000
P 1,500 1st January, 2019 9,000
D 2,000 1st April, 2019 12,000
B 700 1st August, 2019 13,500
S 300 15th September, 2019 14,500
All the shares were ₹ 10 each, ₹ 5 paid up. Ignoring expenses of and remuneration to
liquidators show the amount to be realised from various persons listed above.
(Ans: Liability P:3,000; D:6,000; B:3,150; S:1,500)
A company went into liquidation whose creditors are ₹36,000 includes ₹6,000 on account of
wages of 15 men at ₹100 per month for 4 months immediately before the date of winding up;
₹9,000 being the salaries of 5 employees at ₹300 per month for the previous 6 months, Rent
for godown for the last six months amounting to ₹3,000; Income–tax deducted out of salaries
of employees ₹1,000 and Directors fees ₹500; in addition it is estimated that the company
would have to pay ₹5,000 as compensation to an employee for injuries suffered by him, which
was contingent liability not accepted by the company and not included in above said creditors
figure. Calculate the amount of Preferential Creditors.
(Ans: 18,000)
Page 4.22

In which sequence following payments will be made while preparing liquidator’s statement of
account? 1. Debenture holders 2. Unsecured creditors 3. Legal charges 4. Equity shareholders.
5. Preference shareholders
Z Ltd. went into voluntary liquidation on 31st December, 2019. Balance sheet of the company
as on that date stood as follows:
Liabilities ₹
Issued and subscribed capital:
Reserves & Surplus: Profit & Loss Account (11,25,000)
Interest outstanding on Debentures 1,50,000
Creditors 12,75,000
Total 58,50,000
Assets
Machinery & Plant 25,00,000
Furniture & Fixtures 4,00,000
Stock 5,50,000
Cash at Bank 3,00,000
Total 58,50,000
Other information:-
(i) Preference share dividend are in arrears for the last two years.
(ii) Trade payables include preferential creditors of ₹ 1,52,000.
(iii) The assets were sold and realized as follows :
Land and Building ₹ 12,00,000; Machinery and Plant ₹ 20,00,000;
Furniture & Fixtures ₹ 3,00,000; Stock ₹ 6,00,000;
Trade receivables ₹ 8,00,000.
(iv) Expenses of liquidation were ₹ 1,09,000.
(v) Liquidator is entitled to receive commission of 3% on assets realized except cash.
(vi) Preference shareholders have right to dividend at the time of liquidation.
(vii) The final payment including those on debentures is made on 30th June, 2020.
You are required to prepare liquidator's final statement of account.
(Ans: Settlement 10,000 Shares: 12.35 Refund & 30,000 Shares: 2.65 Call)
The summarized Balance Sheet of Full Stop Limited as on 31st March 2020, being the date of
voluntary winding up is as under:
5,000, 10% Cumulative Pref. Shares 5,00,000 Plant & Machinery 7,80,000
of ₹ 100 each fully paid up
5,000 equity shares of ₹ 100 each, 3,00,000 Stock in Trade 3,25,000
Page 4.23
₹ 60 per share called& paid up

5,000 equity shares of ₹ 100 each, 2,50,000 Book Debts 10,25,000
₹50 per share called& paid up
Securities Premium 7,50,000 Profit & Loss Account 5,50,000
Preferential Creditors 1,05,000
Bank Overdraft 4,85,000
32,00,000 32,00,000
Preference dividend is in arrears for 3 years. By 31-03-2020, assets realized were as follows:
Stock in Trade 3,10,000
Plant & Machinery 7,10,000
Book debts 6,60,000
Expenses of liquidation are ₹ 86,000. The remuneration of the liquidator is 2% of the
realization of assets. Income tax payable on liquidation is ₹ 67,000. Assuming that the final
payments were made on 31-03-2020, prepare the Liquidator’s Statement of Account
(Ans: Settlement 5,000 Shares: 10.10 Refund & 5,000 Shares: 0.10 Refund)
Question 7 (Inter May 2019) (10 Marks) Pg no._____
BT Ltd. went into Voluntary Liquidation on 31st March, 20, when Balance Sheet was as follows:
Liabilities ₹
Issued and subscribed capital:
Reserves & Surplus: Profit & Loss Account (5,25,000)
Interest outstanding on Debentures 1,20,000
Creditors 8,50,000
Total 43,95,000
Assets
Furniture 4,75,000
Patents 1,45,000
Stock 1,80,000
Cash at Bank 75,700
Total 43,95,000
Preference dividends were in arrear for 1 year. Creditors include preferential creditors of ₹
75,000. Balance creditors are discharged subject to 5% discount.
Assets are realised as under:
Furniture 2,85,000
Patents 90,000
Stock 2,80,000
Page 4.24

Expenses of liquidation amounted to ₹ 45,000. The liquidator is entitled to a remuneration of
3% on all assets realised (except cash at bank). All payments were made on 30th June, 2020.
You are required to prepare the Liquidator's Final Statement of Account as on 30th June, 2020.
(Ans: Settlement 10,000 Shares: 47.995 Refund & 20,000 Shares: 32.995 Refund)
Question 8 (RTP Nov 2019) Pg no._____
The following was the draft Balance Sheet of Beta Limited as on 31.3.2020:
Share Capital: Land 1,60,000
14%,1,60,000 Cumulative Pref. Shares 16,00,000 Buildings 6,40,000
of ₹ 100 each fully paid up
32,000 equity shares of ₹ 100 each, 19,20,000 Plant & Machinery 21,60,000
₹60 per share paid up
Reserves & Surplus Nil Patents 1,60,000
14% Debentures (Having a floating 9,20,000 Investments Nil
charge on all assets)
Interest accrued on above debentures 1,28,800 Inventory 4,00,000
Loan on mortgage of land and building 6,00,000 Sundry Debtors 9,20,000
Unsecured Loan Nil Cash at Bank 2,40,000
Creditors 4,71,200 Profit & Loss Account 9,60,000
56,40,000 56,40,000
The dividend on 14% Preference shares was in arrears for one year. Sundry creditors include
preferential creditors amounting to ₹1,20,000.
The assets realized the following sums: Land ₹ 3,20,000; Buildings ₹ 8,00,000; Plant and
machinery ₹ 20,00,000; Patent ₹ 2,00,000; Inventory ₹ 6,40,000; Sundry debtors ₹ 8,00,000.
The expenses of liquidation amounted to ₹ 1,17,736. The liquidator is entitled to a commission
of 2% on all assets realized (except cash at bank) and 2% on amounts among unsecured
creditors other than preferential creditors. All payments were made on 30th June, 2020.
Interest on mortgage loan shall be ignored at the time of payment.
Prepare the Liquidator’s Final Statement of Account.
(Ans: Settlement Refund to EquityShareholders:8,03,840 ie 25.12 per share)
Given below is the Balance Sheet (Draft) of Star Ltd. as on 31st March, 2020:
Share Capital: Machinery 4,75,000
2,500, 6% Preference Shares of ₹ 2,50,000 Furniture 25,000
100 each fully paid up
5,000 equity shares of ₹ 100 each, 5,00,000 Stock in Trade 3,00,000
Fully paid up
5,000 equity shares of ₹ 100 each, 3,75,000 Debtors 6,00,000
₹75paid up
Bank Loan 2,50,000 Cash at Bank 1,25,000
Creditors 8,75,000 Profit & Loss Account 7,50,000
Income Tax Payable 25,000
22,75,000 22,75,000
The company went into liquidation on 1st April, 2020. The assets were realized as follows:
Machinery 4,15,000
Page 4.25
Furniture 20,000
Debtors 5,75,000
Liquidation Expenses 10,000
The liquidators are entitled to a commission at 2% on amount paid to unsecured creditors
excluding payment made to preferential creditors. Calls on partly paid shares were made but
the amount due on 500 shares was found to be irrecoverable. Bank loan is secured on stock.
Prepare Liquidator’s Statement of Account.
(Ans: Settlement 5,000 Shares: 10 Refund & 4,500 Shares: 15 Call)
ABC Limited went into voluntary liquidation. Details are as follows:
1,000 - 10% Preference Shares of ₹100 each fully paid up
Class A - 1,200 equity shares of ₹100 each (₹80 paid up)
Class B - 800 equity shares of ₹100 each (₹65 paid up)
Assets realized ₹3,50,000 and liquidation expenses is ₹8,000. Company has secured Bank
Loan of ₹60,000 and salary of 3 clerks for 3 months at a rate of ₹500 per month are
outstanding. Creditors are ₹70,000.
Calculate amount receivable from / or returnable to equity shareholders.
(Ans: Settlement 1,200 Shares: 59.75 Refund & 800 Shares: 44.75 Refund)
Sky Ltd. went into Liquidation on 1st April, 2021. Following are the details regarding share
capital of the company:
III. 80,000 Equity shares of ₹ 100 each, ₹ 65 paid up.
Surplus available with the Liquidator, after discharging all the liabilities is ₹ 20,00,000.
Distribute this surplus money among different categories of shareholders.
(Ans: Settlement 20,000 Sh.: 29.615 Refund & 30,000 Sh.: 5.385 Call & 80,000 Sh.: 19.615
Refund)
TM Ltd. went in for voluntary liquidation on 31st March, 2020. The Balance Sheet of the
company as at 31.3.2020 is given below:
Share Capital:- Freehold Property 11,85,000
10% Preference Shares of ₹ 100 12,00,000 Plant 6,03,000
each fully paid up
1,00,000 Equity shares of ₹ 10 10,00,000 Stock in Trade 3,72,000
each, fully paid up
Securities Premium 1,00,000 Motor Vehicles 1,15,000
5% Debentures 2,00,000 Sundry Debtors 1,48,000
Interest on Debentures 5,000 Profit & Loss Account 4,28,000
Sundry Creditors 2,30,000
28,51,000 28,51,000
The preference dividends are in arrear for the years 2018–19 and 2019–20.
Page 4.26
The company’s Articles provide that on liquidation, out of surplus assets remaining after
payment of liquidation costs and outside liabilities, it shall be applied firstly towards arrears
of preference dividend, secondly to preference shareholders with a premium thereon at ₹10
per share and finally any residue shall be paid to the equity shareholders.
The Liquidator realized the assets as below:
Free Hold Property 14,25,000
Plant 5,05,000
Motor Vehicles 1,18,000
Sundry Debtors 1,20,000
Creditors were paid less discount of 5%. Debentureholders were paid along with accrued
interest upto 30.6.2020. Liquidator’s remuneration is 2% of the assets realized and cost of
liquidation was ₹7,640. Prepare the Liquidator’s Statement of Account.
(Ans: Settlement Refund to Equity shareholders: 3,09,000 i.e. 3.09 per share)
A liquidator is entitled to receive remuneration at 2% on the assets realized, 3% on the amount
The assets were realized for ₹ 45,00,000 against which payment was made as follows :
Liquidation expenses ₹ 50,000
Preferential Creditors ₹ 1,25,000
The amount due to Unsecured Creditors was ₹ 15,00,000. You are asked to calculate the total
remuneration payable to liquidator. Calculation shall be made to nearest multiple of a rupee
(Ans: Remuneration: 1,38,750)
A Liquidator is entitled to receive remuneration at 2% on the assets realized, 3% on the amount
The assets were realized for ₹ 50,00,000 against which payment was made as follows:
Liquidation Expenses ₹ 50,000 Secured Creditors ₹ 20,00,000
The amount due to Unsecured Creditors was ₹ 30,00,000.
You are asked to calculate the total Remuneration payable to Liquidator. Calculation shall be
made to the nearest multiple of a rupee.
(Ans: Remuneration: 1,83,010)
Question 15 (RTP May 2020) (Similar) Pg no._____
(i) The liquidator of a company is entitled to a remuneration of 2% on assets realized and 3%
on the amount distributed to unsecured creditors. The assets realized ₹ 40,00,000. Amount
available for distribution to unsecured creditors before paying liquidator's remuneration
is ₹ 16,48,000. Calculate liquidator's remuneration, if the surplus is insufficient to pay off
unsecured creditors, in total.
(ii) A Liquidator is entitled to receive remuneration at 2% on the assets realized, 3% on the
amount distributed to Preferential Creditors and 3% on the payment made to Unsecured
Creditors. Assets were realized for ₹ 37,50,000 against which payment was made as:
Liquidation Expenses ₹ 37,500
The amount due to Unsecured Creditors was ₹ 22,50,000.
Page 4.27
You are asked to calculate the total Remuneration payable to Liquidator. Calculation shall be
made to the nearest multiple of a rupee.
(Ans: (i) Remuneration: 1,28,000 & (ii) Remuneration: 1,37,257)
A liquidator is entitled to receive remuneration at 5% of the assets realized and 8% of the
amount distributed among the unsecured creditors. The assets realized ₹ 13,75,000.
Payment was made from realised amount as follows:
Liquidation expenses 13,000
Preferential creditors (treated as unsecured creditors) 88,500
Secured creditors 1,00,000
You are required to calculate remuneration payable to the liquidator.
(Ans: Remuneration: 75,830)
Rain Ltd. went into liquidation on 31st March, 2021. Following are the details regarding share
capital:-
III. 4,00,000 Equity shares of ₹ 10 each, fully paid up.
Surplus available with the liquidator after payment of all the liabilities ₹ 24,00,000. Distribute
this surplus money among different categories of shareholders.
(Ans: Settlement 30,000 Shares: 7,63,635 Refund & 80,000 Shares: 1,81,820 Call & 4,00,000
Shares: 18,18,180 Refund)
Question 18 (Inter July 2021) (5 Marks) Pg no._____
The different categories of shareholders of Earth Limited, who went into liquidation on 1st
April, 2021 are as follows:
(i) 32,000 Equity shares of ₹ 100 each, ₹ 80 paid up
(ii) 48,000 Equity shares of ₹ 100 each, ₹ 35 paid up
(iii) 12,80,000 Equity shares of ₹ 10 each, ₹ 7 paid up.
You are required to distribute the surplus money among different categories of shareholders,
if the surplus available with Liquidator after discharging all the liabilities is ₹ 32,00,000.
(Ans: Settlement 32,000 Shares: 10,21,536 Refund & 48,000 Shares: 6,27,696 Call & 1,28,000
Shares: 28,06,144 Refund)
Super Ltd. was placed in voluntary liquidation on 31.12.2019, when its Balance Sheet was as:
Share Capital:- Freehold Factory 5,80,000
Issued : 6,000 5% Cum. Pref. Shares 6,00,000
of ₹ 100 each fully paid Plant & Machinery 2,89,000
50,000 equity sh. of ₹ 10 each, fully
called up 4,75,000 Motor Vehicles 57,500
Less: Call In Arrears (25,000)
Securities Premium 50,000 Stock 1,86,000
5% Debentures 1,00,000 Debtors 74,000
Interest on Debentures 2,500 Profit & Loss Account 2,14,000
Bank Overdraft 58,000
Page 4.28
Creditors 1,15,000
14,00,500 14,00,500
Preference Dividends are in arrears from 2016 onwards.
The Company’s Articles provide that on liquidation, out of the surplus assets remaining after
payment of liquidation costs and outside liabilities, there shall be paid firstly all arrears of
Preference Dividend, secondly the amount paid up on the Preference shares together with a
premium thereon of ₹10 per share, and thirdly and balance the remaining shall be paid to the
Equity Shareholders. The Bank Overdraft was guaranteed by the Directors who were called
upon by Bank to discharge their liability under the guarantee. Directors paid the amount to
Bank. Liquidator realized assets as follows:
Freehold Property 7,00,000
Motor Vehicles 59,000
Stock 1,50,000
Debtors 60,000
Call in Arrears 25,000
Creditors were paid less discount of 5%. The Debenture and Accrued Interest were repaid on
31.03.2020. Liquidation Costs were ₹ 3,820 and the Liquidator’s remuneration was 2 % on the
amounts realized. Prepare the Liquidator’s Statement of Account.
(Ans: Settlement Refund to Equity Shareholders 1,54,500 i.e. 3.09 per share)
The summarized Balance Sheet of X Ltd., as on 31 March, 2020 are as follows:
st
Shareholder Funds Non Current Assets
75,000 ,10% Pref. Shares of ₹ 10 7,50,000 Current Assets
each
50,000 equity shares of ₹ 10 each, 5,00,000 Sundry Current Assets 21,80,000
fully paid up
25,000 equity shares of ₹ 10 each, 2,00,000 Debenture Issue expenses 10,000
₹ 8 per share paid up not written off
Profit & Loss Account (1,75,000)
Non-Current Liabilities
Mortgage Loan 3,50,000
Current Liabilities
Income-tax arrears: (assessment
completed in Feb 2020) 1,25,000
28,40,000 28,40,000
Mortgage loan was secured against Land and Building. Debentures were secured by a floating
charge on all assets. The company was unable to meet the payments and therefore the
Debenture Holders appointed a Receiver for the Debenture Holders. He bought the Land &
Building to auction and realized ₹ 8,00,000. He also took charge of Sundry Assets of value of
₹ 11,80,000 and realized ₹ 10,00,000. Bank overdraft was secured by personal guarantee of
the Directors of the company and on the Bank raising a demand, the Directors paid off the due
from their personal resources. Cost incurred by the receiver were ₹ 9,750 and by the
Page 4.29
Liquidator ₹ 15,000. The Receiver was not entitled to any remuneration but the Liquidator was
to receive 2% fee on the value of assets realized by him. Preference Shareholders have not
been paid Dividend for period after 31st March, 2018 and interest for the last half year was
due to Debenture Holders. Rest of the Assets were realized at ₹ 7,50,000.
Prepare the Accounts to be submitted by the Receiver and Liquidator.
(Ans: Settlement 25,000 Shares: 1.38 Call & 50,000 Shares: 0.62 Refund)
Virat Ltd. furnishes the following summarized Balance Sheet as at 31st March, 2020:
Balance Sheet as at 31.03.2020
Amount Amount
(₹) (₹)
A. Equity and Liabilities
1. Shareholders’ Fund
(a) Share Capital
10,000, 12% Pref. Shares of ₹ 100 each fully paid up 10,00,000
1,00,000 Equity shares of ₹ 10 each fully paid up 10,00,000
50,000 Equity shares of ₹ 10 each, ₹ 8 paid up 4,00,000 24,00,000
(b) Reserves & Surplus
Profit & Loss A/c (Dr. Balance) (3,50,000)
2. Non-Current Liabilities
12 % Debentures 15,00,000
Loan on Mortgage 4,50,000 19,50,000
3. Current Liabilities
Trade Payables 7,30,000 10,05,000
Total 50,05,000
B. Assets
1. Non-Current assets
Property, Plant & Equipment
Land & Buildings 6,00,000
2. Current Assets
Sundry Current Assets 44,05,000
Total 50,05,000
The mortgage loan was secured against the Land & Buildings. Debentures were secured by a
floating charge on all the assets of the company. The debenture holders appointed a Receiver.
The company being voluntarily wound up, a liquidator was also appointed. The Receiver was
entrusted with the task of realizing the Land & Buildings which fetched ₹ 7,50,000. Receiver
also took charge of Sundry current assets of value ₹ 30,00,000 and sold them for ₹ 28,75,000.
The Bank overdraft was secured by a personal guarantee of the directors who discharged
their obligations in full from personal resources. The costs of the Receiver amounted to ₹
10,000 and his remuneration ₹ 15,000.
The expenses of liquidator was ₹ 17,500 and his remuneration was decided at 2% on the value
of the assets realised by him. The remaining assets were realised by liquidator for ₹ 12,50,000.
Preference dividend was in arrear for 2 years. Articles of Association of the company provide
for payment of preference dividend arrears in priority to return of equity capital.
Prepare the accounts to be submitted by the Receiver and the Liquidator.
(Ans: Settlement 50,000 Shares: 2.75 Refund & 1,00,000 Shares: 4.75 Refund)
Page 4.30

‘A’ Ltd is to be liquidated. Their summarised Balance Sheet as at 30th September, 2019
appears as under
Liabilities ₹
5,00,000 equity shares of ₹ 10 each 50,00,000
Secured debentures (on land and buildings) 20,00,000
Unsecured loans 40,00,000
Total 1,80,00,000
Assets
Other Property, Plant & Equipment 40,00,000
Total 1,80,00,000
Contingent Liabilities are:
For bills discounted 2,00,000
For excise duty demands 3,00,000
On investigation, it is found that the contingent liabilities are certain to devolve and that the
assets are likely to be realised as follows:
Other Property, Plant & Equipment 36,00,000
Taking the above into account, prepare the Statement of Affairs.
(Ans: Estimated deficiency as regards members 57,00,000)
From the following particulars, prepare a Statement of Affairs and Deficiency Account for
submission to official liquidator of Sun City Development Ltd., which went into liquidation on
31st March, 2020:
Liabilities ₹ ₹
6,00,000 Equity shares of ₹10 each, ₹8 paid-up 48,00,000
6% 2,00,000 Preference shares of ₹10 each 20,00,000
Less: Calls in arrear (1,00,000) 19,00,000
5% Debentures having a floating charge on the assets 20,00,000
(interest paid up to 30th September, 2019)
Mortgage on Land & Building 16,00,000
Trade Payable 53,10,000
Wage Payable 4,00,000
Secretary's Salary Payable @ ₹ 5,000 p.m. 60,000
Managing Director's Salary Payable @ ₹ 30,000 p.m. 1,20,000
Page 4.31
Assets Estimated to Book

produce value
Land & Building 26,00,000 24,00,000
Plant & Machinery 26,00,000 40,00,000
Tools & Equipments 80,000 4,00,000
Patents & Copyrights 6,00,000 10,00,000
Inventory 14,80,000 17,40,000
Investments in hand of Bank for an Overdraft of 38,00,000 34,00,000 36,00,000
Trade Receivables 12,00,000 18,00,000
On 31st March, 2015 the Balance Sheet of the Company showed a General Reserve of ₹
8,00,000 accompanied by a debit balance of ₹ 5,00,000 in the Profit & Loss Account. In 2016,
the Company made a profit of ₹ 8,00,000 and declared a dividend of 10% on Equity Shares.
The Company suffered a total loss of ₹ 21,80,000 besides loss of stock due to fire to the tune
of ₹ 8,00,000 during financial years ending March 2017, 2018 and 2019. For the financial year
ended 31st March, 2020, accounts were not made. The cost of winding-up is expected to be ₹
3,00,000.
(Ans: Estimated deficiency as regards members 80,80,000)

Beekey Limited is being wound up by the tribunal. All the assets of the company have been
charged in favour of the company's bankers to whom the company owes ₹ 2.50 crores.
The company owes following amounts to others:
Dues to workers - ₹ 62,50,000
Taxes payable to Government - ₹ 15,00,000
Unsecured creditors - ₹ 30,00,000
You are required to compute with reference to the provisions of the Companies Act, 2013, the
amount each kind of creditors is likely to get if the amount realized by the official liquidator
from the secured assets and available for distribution among creditors is only ₹ 2,00,00,000.
(Ans: Workmen’s share 40 Lakhs & Secured Creditor 160 Lakhs)
Question 25 (Inter Dec 2021) (5 Marks) Pg no._____
A Liquidator is entitled to receive remuneration at 3% on the assets realized and 4% on the
payment made to creditors and company’s bankers. The assets were realized for ₹ 80,00,000.
All the assets of the company have been charged to company’s bankers to whom the company
owes ₹ 1,00,00,000. The company owes following amounts to others:
Due to workers ₹ 25,00,000
Other preferential creditors ₹ 20,00,000
Unsecured creditors ₹ 10,50,000
With reference to the provision of the Companies Act 2013, you are required to calculate the
amount payable to:
a) Workers
b) Other preferential creditors
c) Unsecured creditors
d) Liquidator for remuneration and
e) Company’s banker’s
(Ans: a) 14,92,308 b) Nil c) Nil d) 5,38,462 e) 59,69,230 )
Page 4.32

4 Liquidation of Company

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4 Liquidation of Company

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CA NITIN GOEL LIQUIDATION OF COMPANY

WEIGHTAGE IN PAST YEAR EXAMS

TOPIC 1.1 INTRODUCTION TO CHAPTER

TOPIC 1.1A MODES OF WINDING UP

Petition for Winding Up (Sec 272)

TOPIC 2: ‘B’ LIST CONTRIBUTORIES

'B' List Contributories under Liquidation of a company

TOPIC 3: LIQUIDATOR’S STATEMENT OF ACCOUNT

Preferencial Payments (Section 327)

TOPIC 4A: STATEMENT OF AFFAIRS

Estimated total assets available for preferential creditors, debenture holders

TOPIC 4B: DEFICIENCY ACCOUNT

DEFICIENCY ACCOUNT (List H)

TOPIC 5: OVERRIDING PREFERENTIAL PAYMENTS

Explanation. For the purposes of this section, and section 327—

TOPIC 2: ‘B’ LIST CONTRIBUTORIES

Question 1 (ICAI Study Material) Pg no._____

Question 3 (Inter Nov 2020) (5 Marks) Pg no._____

TOPIC 3: LIQUIDATOR’S STATEMENT OF ACCOUNT

Question 5 (ICAI Study Material) Pg no._____

Question 6 (RTP May 2022) Pg no._____

(b) Trade Receivables 20,50,000

Trade Receivables 2,30,000

Question 13 (RTP May 2021) (Similar) Pg no._____

Question 14 (ICAI Study Material) Pg no._____

Question 17 (ICAI Study Material) Pg no._____

Question 18 (ICAI Study Material) Pg no._____

Bank Overdraft 30,000

TOPIC 4A: STATEMENT OF AFFAIRS

Question 19 (ICAI Study Material) Pg no._____

The following assets are valued as under:

Question 20 (ICAI Study Material) Pg no._____

TOPIC 4B: DEFICIENCY ACCOUNT

Question 21 (ICAI Study Material) Pg no._____

Question 22 (ICAI Study Material) Pg no._____

TOPIC 5: OVERRIDING PREFERENTIAL PAYMENTS

Question 24 (ICAI Study Material) Pg no._____

TOPIC 2: ‘B’ LIST CONTRIBUTORIES

Question 1 (RTP Nov 2018) Pg no._____

TOPIC 3: LIQUIDATOR’S STATEMENT OF ACCOUNT

Question 4 (ICAI Study Material) Pg no._____

₹ 60 per share called& paid up

Trade Receivables 3,15,000

TOPIC 4A: STATEMENT OF AFFAIRS

Question 22 (ICAI Study Material) Pg no._____

TOPIC 4B: DEFICIENCY ACCOUNT

Assets Estimated to Book

Question 24 (Inter Nov 2020) (5 Marks) Pg no._____

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