A quick guide on what is liquidation of a company?

A quick guide on what is liquidation of a company?

What is liquidation of a company?

Liquidation is the liquidation of a company or a company, the sale and distribution of assets depending on whether the company is bankrupt. The liquidation of a company usually occurs when the limited liability partnership concludes that the company, for whatever reason, will not continue in business. In this case, you may consider liquidating your company. This means using your assets for cash.

The conversion of an asset into cash is usually done to settle a liquidation, such as a lender’s investment in a business or a loan taken out to grow a business.

Liquidation results in the dissolution of a business or company and the cessation of all activities. This is a plan for underfunded (bankrupt) companies to include remaining debt.

 Why was the company liquidated?

Bankruptcy is the main reason why companies choose to liquidate their assets. Bankruptcy usually means that the company is not ready to make the required payments on time. If you choose to opt out, your business assets will be converted into cash and the cash will be used for those payments.


Your business is no longer solvent, so you may need to consider liquidating. If the company remains bankrupt, the directors of the company may manage it, but if the company fails, the company may be placed under the control of a liquidator. The trustee is in charge of the liquidation or liquidation function of the company. ..

If the company goes bankrupt, the remaining assets will be sold to pay off creditors. The amount remaining after all necessary payments have been made is distributed among the shareholders.

 What are the three types of compensation?

Liquidation may seem easy, but there are three conditions under which a company can be liquidated. For each type of compensation described below, there are specific processes that must be followed.

1. Voluntary liquidation of partners

In some cases, business owners may choose to close their business for various reasons. In this case, the voluntary liquidation of the affiliate means that the company really wants to make payments on time, but the owner or employee of the company decides to go into liquidation.

2. Voluntary liquidation of creditors

This occurs when the company’s management realizes that the company cannot pay its debt and may initiate a method of liquidation after participating in a vote with shareholders. If the majority of shareholders (75% or more) voted for liquidation, you can initiate this method.

3. Forced liquidation

In this situation, the company cannot repay the debt in full, and the directors go directly to the court with a request for the settlement method to be applied.

The role of the liquidator

Liquidator is designed to handle the calculation method. His main task is to take inventory of the company’s assets and return them to creditors at a fixed rate, if any.

An essential part of the liquidator’s objective is that the liquidator has the right to change these activities and therefore must acquire any company assets that have been decommissioned or sold below the company’s market price. , is to investigate the entire work.

Bankruptcy and Bankruptcy Law (IBC)

The first step in a corporate bankruptcy analysis method is to get all possible attempts to replace and reopen an entity. This is usually achieved by creating and implementing a “solution plan”.

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But if that doesn’t work, how to lead to liquidation. Interestingly, the IBC preamble does not apply to clearing. Clearing is only used as a last resort if there is no solution scheme or if the proposed solution is not appropriate.

 Settlement order

 A clearing order may be established by the Examining Authority (AA) in the following situations:

• If you did not use the solution before the specified period

• When the Creditors Commission (Croc) permits the liquidation of corporate debtors

• If the Examining Authority (NCLT) rejects the resolution, the plan submitted

• When the corporate debtor opposes the approved resolution system

How long does it take to liquidate a company?

If your business goes bankrupt and needs to be liquidated, it is useful to understand how long it will take before you can continue your life. When you are in this position, you need to identify how clearing works so that you can take the necessary steps for yourself and your business. It’s important to understand that the more proactively you organize all your paperwork, the faster it will be. As a director, you need to support your trustee.

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