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 It is also known as winding-up. Is a process under Company Law that results
in the company ceasing to exist. A company can decide to go into voluntary
liquidation in which case the company arranges voluntarily to enter
 Example : Where a third party (an unpaid creditor) wishes to pursue
liquidation of an insolvent company, as its debt is not being addressed,
application must be made to the High Court for a decision on whether a
liquidator should be appointed to the company.
 Realising the assets of the insolvent company and achieving the best possible
 •Address outstanding claims against the limited company and satisfy the
claims as set-out by law;
 •Distributing the returns to the company’s creditors in order of priority;
 •Acting in the best interests of the creditors (not the directors).
 Draft a liquidation and distribution account
 Distribute dividend payments to creditors
 There are two difference of winding up which is :

Winding up by the court Voluntary winding up

(compulsory Liquidation)

Sec 218 –the company unable to pay If the company passes the special
its debt (most common ground ) resolution that the company should
be wound up voluntarily .

If the company has by special An ordinary resolution passed in a

resolution, resolve that the company general meeting for winding up is
should be wound up by the court sufficient
Two types of voluntary winding up :
a)Members voluntary winding up :

Where the shareholders of the company decide to put the company into
liquidation and there are enough assets to pay all the debt of the
company .

b) Creditors voluntary winding up:

Where the director of the company decide to place the company into
liquidation because there is no enough asset to pay the debt of the
company .
 Fact: G.N.S Nidhi Limited, a public limited company which was incorporated on 03.01.1979
under Companies Act, 1956 and was functioning with its registered premises situated at No.128,
Usman Road, T.Nagar and was functioning as a Non-Banking Finance Company accepting
deposits from the public and advancing loans to various parties. By an order dated 18.10.1997
made in C.P.No.60 of 1997 the Hon’ble High Court, Madras appointed the Official Liquidator
attached to the said court as the Provisional Liquidator of the company. Subsequently, the Hon’ble
Court vide order dated 17.12.1999 made the Provisional Liquidator the Official Liquidator of the
 Owing to the fact that the company in liquidation had over 55 branches spread across the states of
Tamil Nadu, Karnataka, Kerala, Maharashtra and the Union Territory of Pondicherry, and that
several of the branches were functioning at rented premises, it took the Official Liquidator more
than two years commencing 28.06.1999, to ascertain whether or not the said braches belonged to
the company in liquidation and to take possession of the same.
 Held: : Pursuant to the High Court order dated 1.11.2006 in C.A.No.1896/2006 claims against the
company in liquidation was called for on 12.11.2006 and in response claims totaling
Rs.27,85,04,711/- was received by the Official Liquidator. The delay in adjudicating the claims
against the company is due to the fact that there were over 9300 claimants and that over 6000
claims were defective as original proof of debt was not produced. In this connection two reminders
were sent to the claimants who had preferred defective claims and as of date over 5000 claims
have been adjudicated to proof and the Official Liquidator is taking all possible efforts to declare
dividend within in 12 months.