1

Winding up of Companies and Accounts

in Liquidation
Acompany is aan artificial persOn which comes into existence by virtue of law and which
Comestoan end as per the provisions mentioned in law. Acompany has a separate existence from
members,. Company cannot be liquidated even if all the die because both
is members of companycannot
the companyand members have Separate existence. The directors or members liquidate the
company at their desire. If the directors or members want to liquidate the Company they have to
follow any of the prOcedure given in the COmpany law. Liquidation means closure of whole
sNCSS. It is aprocess by which the business of a company is closed, assets are sold, the money
ealised from sale is used tor payment to creditors and if any is amount left after payment to
Dnous, creditors it is divided between the shareholders as per the provisions given in the articles.
Therefore liquidation is a process by which the life of a company comes to an end.
Modes of Winding up of Company
According to Section 270(1) of the Indian Companies Act, 2013 the winding up of a
company may be by any of the following methods :
I. Compulsory winding up or winding up by Tribunal.
II. Voluntary winding up.
Procedure of Compulsory Winding up :
The following procedure is followed in the case of compulsory winding up :
1. Application for winding up of Company : A petition for compulsory winding up to the
Iribunal will be submitted by any of the following [sec. 272(1)] :
(i) The Company;
(ii) acreditor or creditors; b
(1) any contributory or contributories;
(iv) the Registrar;
behalf; or
(V) any person authorised by the Central Government in that
(Vi) by the Central Government or State Government.
2. Direction by Tribunal for filing of Statement of Affairs : A petition presented by the
npany for winding up before the Tribunal shall be admitted only if accompanied by a statement
altairs in such form and in such manner as may be prescribed. Where a petition for winding up
is filed before the Tribunal by any person other than the company, the Tribunal shall, if satisfied
 Winding up of Companies and Accounts in Liquidation
1.2
that a prima facie case for winding up of the company is made out. by an order direct the company
form
objections alono with statement
a of affais within thirty days of the order in such
t0 Tile its
and in such manner as mav be prescribed. (Sec. Z14). ofa
Appointment of Company Liquidator (Sec. 275) : For the purpose ot winding up shall
3. the passing of the order of winding up,
COmpany by the Tribunal, the Tribunal at the time of
panel maintained under sub-section (2) as the
dppont an official liquidator or a liquidator from the the company, in respect Of which an order
of
COmpany liquidator. The directors and other officers
within a period of thirty days of such order, submit
lor Winding up is passed by the Tribunal shall to the
dt he cost of the company, the books of
account of the company completed and audited up
specified by the lribunal.
date ot order, to such liquidator andin the manner liquidator or hquidator and the fee
The terms andconditions of appointment of a provisional the basis of task required to be
pavable to him or it shall be specified by the Tribunal on
company.
pertormed, experience, qualification of such liquidator and size of the
4. Rights of Liquidator and Report : The liquidator takes
the assets of the company in his
as per statutory
possession and pavs the creditors and shareholders by selling the assets
the statement to the
requirements. Within 6 months from the date of wvinding up order he presents
Tribunal.
: After checking the
5. Order of completion of winding up and information to Registrar
within 30 days
report of liquidator the Tribunal gives the order of completion of winding up and Registrar. The
of
of this order, the liquidator sends a certified copy of this order to the of'ce
Registrar cut ofd the name of company from records on the basis of such order.
II Voluntary Winding up :
settle their
The object of avoluntary winding up is to enable the membes nd creditors to
affairs among themselves without seeking assistance of the Tribunal. A company may be wound up
voluntarily under Section 304, according to the following procedures :
(1)By ordinary resolution : () When the period (if any) fixed for the duration of company
by its articles has expired. company can be wound up by an ordinary resolution passed by the
company, or (ii) when the articles provide for the dissolution of the company on occurence of an
event and such event has occurred, the company can be wound up by passing an ordinary
resolution.
(2) By Special resolution: When the company for reasons other than above has decided to
wind up its affairs it may wound up voluntarily by passing a special resolution.
(1) Declaration of Solvency (Sec. 305) : Twodirectors, where there are only two directors,
and a majority of directors, where there are more than two, should make a declaration called
*declaration of solvency' verified by an affidavit. In the declaration they have to state that they
have made a fullenquiry into the affairs of the company and have formed the opinion that the
company has no debts or that it willbe able to pay its debts in full within a period not exceeding
three years from the commençement of winding up. The declaration should be made and filed with
the Registrar within five weeks immediately before the date of passing of winding up resolution.
(2) Meeting of Creditors (Section 306) : The company shall along with the calling of
meeting of the company at which the resolution for the voluntary winding up is to be proposed,
caused a meeting of its creditors either on the same day or on the next day and shall cause a notice
of such meeting to be sent by registered post to the creditors with the noticed of the meeting of the
companyunder Section 304. The board of directors of the company shall cause to be presented a
Winding p of Companies and Accounts in Liquidation 1.3

stalement of the position of the affairs of the COmpany together with a list of creditors of the
full copy of declaration under Section 305 and the estimnated amount of the clajms
Company,i f any,
beforethe mee ting and appoint one of the directors to preside at the meeting.
Where (wo-thirds in value of creditors of the COmpany are of the opinion that it is in the
interestof all parties that the company be would up voluntarily then only the company can be
woundup voluntarily otherwise not.
unless--
A declaration of solvency made shall have no effect for the purpose of this Act,
(i) it is made within 5 weeks immediately preceding the date of the passing of the resolution
for
inding up the company and it is delivered to the registrar for regis tration before that date;
(ii) it contains a declaration that the Company is not being wound up to defraud any person
orpersons;
(ii) it is accompanied by a copy of the report of the auditors of the company on the prolat
a staterment of the
account and the balance sheet on that date which Would also contain
and losS
assets and liabilities of the company on that date; and
(iv) where there are any assets of the comnpany, it is accompanied by a report of the valuation
of the assets of the company prepared by a registered valuer,
(3) Publication of resolution to wind up voluntarily (Section 307): Where a company
it shall within fourteen
has passed aresolution for voluntary winding up and a resolution is passed,
by advertisement in the official
days of the passing of the resolution give notice of the resolution
the registered office of
Gazette and also in a newspaper which is in circulation in the district where
the company in situated. winding up
(4) Commencement of voluntary winding up (Section 308) : A voluntary winding up.
voluntary
shall be deemed to commence on the date of passing of the resolution for
in its general,
(5) Appointment of Company Liquidator (Section 310): The company
company liquidator
a
meeting, where a resolution of voluntary winding up is passed, shall appoint
purpose of winding up it affairs and
from the panel prepared by the central Government for the to the company liquidator.
distributing the assets of the company and recommend the fee to be paid Board of Directors and
of the
On the appointment of a Company Liquidator, all the powers
of giving notice of such appointment
Of the managing director shall cease, except for the purpose
of the Company Liquidator to the Registrar. (Section 314) : The company liquidator
(6) Powers and Duties of Company Liquidatorregular and proper books of account. The
Shall settle the list of contributories. He shall maintain
acCounts and file such statements of
COmpany liquidator shall prepare quarterly statement of quarter with the Registrar. The
dccounts duly audited within thirty days from the close of each the contributories
adjust the rights of
Onpany liquidator shall pay debts of the company and shall winding up of the
themselves. Company Liquidator shallreport quarterly on the progress of
aniong but at least one meeting each of
Onpany to the members and the creditors as and when necessary
Creditors and members in every quarter.
Company Liquidator shal1
As soon as the affairs of a company are fully wound up, the
prepare a report of the winding up showing that the property
fully discharged andthereafter
and assets of the company have
call a general meeting of the
been disposed of and its debtlaying the final winding up accounts before it and giving any
COmpany for the purpose of
Cxplanation
If the therefore.
majority of the members of the company after considering the report of company
shall be wound up pass a resolution for its dissolution,
liquidator are satisfied that the company
 and Accounts in
1.4 Winding up of Conpanies Liquidation
Within two weeks after the meeting the liquidator shall send to Registrar a copy of the final
passed in the meeting and file an
winding up accounts of the company and copies of resolution company relating to the windine
up, before along
PPpeaion the Tribunal report
with hisfor passing the books
with an order of
papers of the
and dissolution of the company. If the Tribunal is
within sIXIy days of the receint
Sausied, the Tribunal shall pass an order dissolving the company
a copy of order with the registrar within
O the application. The company liguidator shall file strike olf the narme of tne company from
hrty days, After receiving the order the Registrar shallthis effect.
the registrar of companies and notification in
Côntributories
me ans aperson liable to
According to Section 2(36) oCompanies Act, 2013, contributory and Includes holders of
up
COntibute to the assets of company in the event of its being wound
shares which are fully paid.
company starts the me mbers become
It is to be seen that as soon as the winding up of
is liable to pay unpaíd
Contibutory. Holder of partly paid-up share is acontributory be cause hethe list of contributories,.
in
amount on share, Inaddition, fully paidshareholders are also included
from the members liable to pay
because the liquidator prepares the list not only to collect money
Holders of fully paid shares
but also to distribute the balance amount remaining after winding up. contributories.
included in the list of
are entitled to receive the balance amount therefore they are
The following persons are included as contributories :
members whose names are included in the
1. Present members : Present memberS are the
company every
register at the time of starting of winding up proces. In case of winding up of a
COmpany limited by
present member is liable to contribute in the assets of company. In case of winding
shares. In case of
shares, the member is liable for the amount which remain unpaid on his
prepared which is known as List-A' and the
up of company a list of these present shareholders is
members are known as Contributories of List A.
one year
2. Past members : Persons who are ceased to be members of the company within
because a past member is liable
before the commencement of winding up. Their liability is secondary
members of the company
only when the present members do notmake the full payment. A list of past
known as 'B-List of Contributories
is prepared which is known as B-List' and the members are
Liability of Past Members :
Past members i.e. 'B-List' contributories are liable as per the following conditions
commencement
(i) Past member is not liable, if he ceased to be a member before 1 year of
of winding up. ceased to be a
(ii) The ex-member will not be liable for the agreements done after he
member.
(iii) The ex-member shall be liable only for the amount remained unpaid on shares.
(iv) The ex-member shall not be liable till the Tribunal is satisfied that the present members
are unable to make contribution.
the time of
(v) The liability of ex-members shall be in proportion to the shares held at
ceasing of membership.
Illustration 1: Bad Luck Limited went into voluntary, liquidation and the proceedings
realisation
payment out of the
commenced on 2nd July, 2016. Certain creditors could not receive
of the A' List. The following details
of assets and out of the Contributions from the contributories
available to you :
of share transfers are made
 1,250 out of whích 1,000 will be Statement of Affairs

as per the order of the Tribunal or provisional oficial

When winding up of company is required to present a
uidator is appointed by the Tribunal, the directors and officers are
within 21 days of winding up order or appointment of
latement of 2affairs to the liquidator in the statement of affairs:
are mentioned instruments are
Iquidator. The following points hand, cash at bank and negotiable
(1) Assets of company in which cash in
mentioned separately.
(u) Loans and Liabilities. name, address and business and whether they are
of creditors i.e,
(iii) Full disclosure of securities.
secured, disclosure
Secured or unsecured; if
 of Companies and Accounts in Liquidation
1.6 Winding up
and business and the amount to
their name, address
(iv) Name of debtors of the company,
be recovered from them.
infornation required by Central Government and liquidator.
(v) Other
prepared in a prescribed format which is as followS:
Statement of affairs is of Affairs
Form of Statement the date of
the affairs of ..... Ltd., on the .....day of ...20.* being
Statement as to
appointing Provisional Liquidator or the date directed by the Official
Windng up order (or oder assets at estimated realisable value and liabilities
Liquidator as the case may be) showing
expected to rank:
Estimated
Assets not specifically pledged (as per list A) realisable
Bank Balance value
Cash in hand
Marketable Securities
Bills Receivable
Trade Debtors
Loans and Advances
Unpaid Calls
Stock-in-Trade
Work-in-Progress
Freehold Property, Land and Buildings
Leasehold Property
Plant and Machinery
Furniture, Fittings, Utensils etc.
Investments other than Marketable Securities
Livestock
Other Property viz.,

Assets specifically pledged (a) (b) (C) (d)

(as per Iist B') Estimated Due to Deficiency Surplus
realisable secured ranking as carried to
values creditors unsecured last column

Estimated Surplus from Assets specifically pledged (Carried to last column)

Estimated Total Assets available for Preferential
Creditors, Debentureholders, secured by a floating
charge, and Unsecured Creditors (carried forward)
Summary of Gross Assets
Gross realisable valueof Assets specifically pledged
Other ASsets
Gross Assets Total )
Note : AlAssets specifically mortgaged, pledged or otherwise given as security should be
included under this head. In the case of goods given as security, those in possession of the
Company and those not in possession should be separately set out.
 1.7
Winding up of Companies and Accounts in Liquidation
Gross Estimated Total Assets available for Preferential Creditors,
Liabilities Dcbenture-holders
secured by a tloating charge, and Unsecured Creditors (Brought forward)
Liabilities
(to be deducted from surplus or added to
deficiency as the case mayoe)
Secured Creditors (as per list B') to the éxtent to which claims are
estimated to be covered by Assets specifically pledged [item (a)or (b)
whichever is less]
(Insert in Gross Liabilities Column
only)
(deduci) Preferential Creditors (as per list C)
Estimated balance of assets available for debenturehol ders and creditOTS
secured by a tloating charge and unsecured creditors (deduct) Debenture
holders and creditors secured by a floatingcharge (as per list "D )
Estimated surplus/deficiency as regards Debentureholders
Unsecured Creditors (as per list E)
Estimated unsecured balance of claims of Creditors
Partly secured on specific assets brought from (c)
Trade Account
Bills Payable
Outstanding Expenses
Bank Overdraft
Contingent Liabilities
|Estimatedsurplus/deficiency as regards creditors, being difference between
Gross Assets and
Gross Liabilities
Issued and Called up Capital
|Preference Share of ? ..... each
R..... called up (as per list F)
.Equity Shares of ?... cach
?...... called up as per list (G)

EstimatedSurplus/Deficiency as regards Members (as per list 'H)

These figures must be read subject to the following notes :
1. (a) There is no unpaid capital liable to be called up, or
(b) The nominal amount of unpaid capital liable to be called up is
estimated to produce ..... which is/is not charged in favour of Debenture
holders |strike out (a) or (b)]
2. The estimates are subject to cost of winding up and to any surplus or deficiency on
rading pending realisation of assets.
It is clear from the above format that the assets and liabilities of company are shown under
different headings. Description of these lists is as follows:
1. Assets not specificallypledged as per List A : Under this heading the assets which are
Otpledged are shown. In amount column, the realisable value of these assets is shown, If arrears
Of share capital is given, the amount which can be realised is shown.
 1.8
Winding up of Companies and Accounts in Liquidation
2. Assets Specifically
Shown under this head, Underpledged as per List B:The assets which are pledged with creditors is
this head, the related description of assets and loarn is shown
TOur columns of amount. In the first column, the realisable value of under
asset kept With the creditor is
Shown, in second column amount Davable to secured creditors is shown. The amount
irStcolumn is compared with second coumn. If amount of first column is less recorded in
than that of second
COun, the amount of deficiency is recorded in third column. If realisable value of asset is higher
than the amount of loan, it is recorded in fourth colunn. All he four
columns are totalled.
hrd column will show the amount of unsecured creditors which will be shown in Total
of
unsecured creditors, Total of fourth column will show the surplus of assets over liabilitiesList
E of
added in assets of List A to know the total realisable value of which is
assets.
3. Overriding Preferential Payments: The Companies Act, 2013 has introduced
326 which states that workmen's dues & debts due to secured Section
creditors, shall be paid in priority to
all other debts. These debts shall be paid in full, unless the assets are
insufficient to meet them, in
which case they shall abate in equal
proportions.
Workmen's dues in relation to a company, means the aggregate of the following sums
(1) All wages or salary including wages payable for time or piece work & salary earned
wholly or in part by way of commission of any workman & any compensation payable
to any workman under any of the provisions of the Industrial Disputes Act,1947;
(1) 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 employmnent before,
or by the effect of, the winding up order;
(iii) All amounts due in respect of any compensation or liability for
comnpensation under
Workmen's Compensation Act, 1923 in respect of death or disablement of any workman
of the company;
(iv)All sums due to any workman from aprovident fund, a pension fund, a gratuity fund or
any other fund for the welfare of the workmen maintained by the company.
4. Preferential Creditors as per List C: Preferential creditors are those
unsecured
Soreditors who are paid in priority to creditors having a floating charge and other (non
preferential) unsecured creditors. AS per Section 326 of Companies Act. 2013 preferential creditors
include the following
(i) All revenues, taxes, cesses and rates due to the Central or State Government or to a
local authority which have become due and payable within twelve months before the
date of winding up order.
(ii) All wages or salaries of any employee not exceeding 20,000 w.e.f.17-2-1997 in
respect of services rendered to the company and due for a period not exceeding four
months within the said twelve months before the date of winding up order. In
addition, any compensation to a worker under Industrial Disputes Act, 1947 upto
?1,000 is also deemed as preferential creditor.
(iii) Allaccrued holiday remuneration becoming payable to an employee. Officer is not
included in it.
(iv) If any person has given any loan to the company for making payment under (ii) and
(ii) above, he will be assumed as preferential creditor.
(V) Allamount due in respect of contribution payable during the twelve months under the
Employees' State Insurance Act, 1948. This rule does not apply in case winding up of
company is voluntary for amalgamation or reconstruction.
Windingupof
Companies and Accounts in Liquidation 1.9
AlI
(vi)
annly compensation due
apply when winding upunder Workmen's Compensation OrAct,recOnstruction.
1923. This rule does not
is voluntary for
a amalgamation
(vii) AII sums due to any
or any other fund foremployee from provident fund. a pension fund, a gratuity fund,
the
(viii) The expenses of
welfare of the
any investigation held in employees maintained by the company.
they are payable by the pursuance of Section 213 or 216 in so far as
5. Debentures having floating
company. (Sec. 327)
Generally debentures have charge on the assets of the Company as per List D:
floating charge on movable and
hey are
shown before
unsecured immovable assets of Company. therefore
creditors. they have fixed charge on any asset they are shown
If
n List B.
6Unsecured creditors as per List E : All creditors excent
secured creditors are
included preferentíal creditors and Tuny
a partly in this list. Total of
thislist. Deficiency as per List Bis included in
1. Preference Share Capital as per List F :
d If there is calls in arrear the Called up Share Capital is shown under this
realisable value is shown in List A and unrealised
amournt is
deductedfrom List F. If there is
s capital is added in deficiency and indeficiency as regards creditors in statement of affairs the amount
case of
8. Equity Share Capital as per List G : surplus, it will be deducted from surplus.
The called up capital is shown in the same
it is added and in case of surplus it is demanner
s Dreference share capital. In case of
9. Deficiency or Surplus as regards
deficiency ducted.
case of winding up is included in the members as per List H: Deficiency or Surplus in
list.
1.12
Winding up of Companies and Accounts in Liquidation
List H'-Deficiency/Surplus Account
The period covered by this account must commence on a date not less than 3years before the
date of the winding-up order
order (or the order appointing Provisional Liquidator, or he date
0y he Otficial Liquidator) or. if the company has not bcen incorporated for the whole of directed
Perod. the date of formation of he company, unless the Official Liquidator otherwise agrees.
Items contributing to deficiency (or Reducing Surplus) :
I. EXCess (if any)of Capital and Liabilities over assets on the ...20.....as shown by
Balance Sheet (copy annexed),
2. Net dividends and bonuses declared during the period..20...to the date of the
statement.
3. Net rading losses (after charging items shown in note below) for the same period.
4. Losses other than trading losses written off or for which provision has been made
1in the books during the same period (give particulars or annex schedule).
S. Estimated losses now written off or for which provision has been made for the
purpose of preparing the statement (give particulars or annex schedule).
6. Other items contributing to Deficiency or reducing Surplus.
Items reducing deficiency (or contributing to surplus) :
I. Excess (if any) of assets over capital and liabilities on the ....20.... as shown in
the Balance Sheet (copy annexed)
8. Next trading profits (after charging items shown in note below) for the period
from the ...20... to the date of statemnent.
9. Profitand income other than trading profit during the same period (give
particulars or annex schedule).
10. Other items reducing Deficiency or contributing to Surplus.
Deficiency/Surplus as shown by Statement of Affairs iset
Note as to Net Trading Profit and Losses :
Particulars are to be inserted here (so far as applicable) of the items mentioned
below which are to be taken into account in arriving at the amount of net
trading profits or losses shown in this account :"
Provision for depreciation, renewals or iminution in value of fixed assets
Charges for Indian Income-tax and other Indian taxation on profits
Interest on debentures and other fixed loans, payment to directors made by the
Company and required by law to be disclosed in the accounts
Exceptional or non-recarring expenditure : per
Less: Exceptional or non-recurring receipts
Balance, being other trading profits or losses
Ebio
Net trading profit or losses as shown in Deficiency or
Surplus Account above ... DE
Signature: Dated 2016
 Liquidator's Final Statementof Account
Liquidator is
As aleady discussed, acompany can be wound up by Tribunal or voluntarily.
appointedin both the cases, He is the highest authority of company after winding up order. As soon
payment of loans and
as winding up order is issued he takes over the assets of compauy and make
capital by selling them.
appointed by Tribunal. It is the
If company is liquidated by Tribunal, the liquidator is also
duty of liquidator to keep records of receipts and payments ofmade by him and present a statement at
company are realised and all the
the end of six months to the Tribunal. When all the assets the
account to the Tribunal. It is
liabilities are paid then the liquidator presents a final statement of
called Liquidator's Final Statement of Account.
by shareholders, therefore he presents
Ifcompany is voluntarily winding up, he is appointedassets
which realised and liabilities paid are
his final statement of account to the company in
shown.
The format of Liquidator's Final Statement of Account' is as follows :
+Strike out what does not apply
+Here state whether the winding up is a members
winding up
or creditors' voluntary winding-up or aunder the
under the supervision of the Court, If
number of the
supervision of the Court, mention the
date of the order.
petition in which the order was made and the
Liquidator's Statement of Account of the Winding-up
(Members'/Creditors' Voluntary winding-up)
Ltd.
1. Name of the Company
2. Nature of proceeding : winding-up:
3. Date of commencement of the
Liquidator:
4. Name and address of the been conducted and the property of the company
Statement showing how the winding-up has (commencement of winding-up
from ..... ..20
has been disposed off winding-up.)
to ..20(close of
Mindingt p of Companies and
Accounts in Liquidation 121
Receipts
Estimated Value
value realised Payment Payment
Assets:
lCashatBank Legal charges
lCashin Hand Liquidator's remuneration
Marketable Securities Where applicable:
Bills Receivable % on 2 .... realised
Trade Debtors. % on ? .... distributed
Loansand Advances Total
SLock in Trade (By whOTn fixed ...)
Work in Progress Auctioneer's and valuers
Freehold Property charges
Costs of possession and
Leasehold Property maintenance of estate
Plant and Machinery Cost of notíce in Gazette
Furniture, Fitting, and newspapers
Utensils, etc. Incidental outlay (estab
Patents, Trade Marks. lishment charges and
etc. other expenses of
Investment other than liquidation)
Marketable Securities ... Total costs and charges
Surplus from Securities (i) Debentureholders :
Unpaid Calls at Payment of
Commencement of Debenture per ? ....
Payment of ? .....
winding up Per debenture
Amount received from
Payment of ? ....
calls on contributories Per debenture ?...
made in the
(iü) Creditors :
winding-up ....
*Preferential
Receipts as per *Unsecured :
Trading Account Dividend (S) ....P.
Other Property in the rupees on?
(The estimated of the
amount expected to rank
Total for dividend was (?...)
Less : (iii) Returns to contribu
Payment to redeem tories :
securities ..P per rupee .. T
Cost of execution share
...P. per rupee ...
Payment as per share *
Trading Account .P. per rupee .... T
share ....*

be separately shown if all creditors have

Preferential creditors need not
number:
*State the
paid in full.
1.22 Winding up of Companies and Accounts in
State nominal value and class of share.
have proved to
Liquidation
(1) The following assets estimated to be of the ........ be
(GIve details of the asscts which have proved to be
unrealisable) unrealisable
(2) Amount paid into the Companies Liquidation Account in respect of :
(a) Unclaimed dividends pavable tocreditors in the winding up.
(b) Other unclaimed distributions in the winding-up
(C) Money held by the company in trust in respect of
dividend or other sum due before the commencement of
he winding up to any persons as a member of the company
(3) Add here any remarks the Liquidator thinks desirable : (Sd,)
Dated this 20
day of ...
Liquidator
I declare that the above statement is true and contains a full and accurate account of the
winding up from the commencement to the close of the winding up.
Dated this day of ..20.

Clarification of the Information given in the Liquidator's Statement of Account :

3(LiqSuia.dat)or
It is clear from above format that following information are given in the liquídator'
statement of account :
(a) Amounts realised by him (b) Payment to various liabilities (c) Distribution of Surplus
Detailed explanation of each is as follows :
(a) Amount realised by liquidator : A liquidator can receive or realise money on winding
up of company in following ways :
1. Realisation from Sale of Assets : A liquidator can realise money from sale of assets which
are not pledged. He takes possession of cash and bank balances of company. He enters the amount
received from assets and cash and bank balance on the left side of Statement i.e. receipts side.
2. Realisation from Security with fully secured creditors : Secured creditors are the
creditors who are having assets of company pledged as guarantee to loan. In case of winding up
they have right tO sell the pledged asset. They withhold the amount equal to their loan and retum
the balance. It is shown separately in receipt side of liquidator's statement. Sometimes the creditors
give the right to dispose off the asset to liquidator. In this case also, only surplus will be shown in
the statement. Therefore, payment made to secured creditors is not shown in the statement.
3. Receipt of unpaid calls : f any shareholder has not paid the amount called up on shares
then in case of winding up the liquidator has right to realise the amount. Amount realised is shown
on receipts side of statement.
4. Realisation from contributories : If the shares of company are partly paid up and the
assets are not sufficient to pay off the creditors, the liquidator can realise the unpaid amount Irom
contributories. The uncalled capital is first realised from 'A List of contributories' and if they art
incapable he will realise the amount from 'BList of contributories'. The amount realised is show
in receipts side of liquidator's statement.
5. Realisation of Penalty from directors etc. : If any director or officer is guily
misconduct or fraud with company and the Tribunal has penalised him for it, the liquídatOr wi
recover amount of penalty from them. It will also be shown in receipts side of statement.
make
(b) Payment of various liabilities: The liquidator uses the money realised to shown at
payment to creditors and shareholders. The payments are made in a certain order and are
right side of statement. The order payment is as follows :
Winding ip of Companies and Accounts in Liquidation 1.23

1. Legal Expenses : If at the time of winding up company has filed a suit on other company
orhas defended any sut, the expenses made in this behalf are called legal expenses. The liquidator
hasto paythem at priority, therefore these are shown first on the payment side.
Liquidator's Remuneration : The liauidator receives his remuneration after payment o
legal expenses, Generally, liquidator receives commission in two ways : First, as percentage of
amountrealised on assets and secondly as percentage of amount paid to unsecured creditors or
equity shareholders. These are described as
)Commission on the assets realisedfollows
:
: It is calculated on the basis of percentage given O
assets realised by liquidator. As we have seen that the liquidator receives surplus amount from
secured creditors whether it is to be included in calculation of commissi1On Or not-authOrS are of
view that until unless anything is given in question, it is to be included in calculation of
commission, Sometimes, secured
creditors give the right to the liquidator to realise the asset with
Aom The whole amount realised is included in calculation of commíssion. Another question
arises
i that whether coMmission should be given on cash and bank balances on the date of winding up
or not. Generally, these are not included if commission is to be paid on assets realised. But 11
commission is to be paid on amount realised, these are included for calculation of commission.
() Commision on the amount paid to unsecured creditors : Commission is calculated
on the amount paid to unsecured creditors at a given percentage. The question arises whether
amount paid to preferential creditors should be included in calculation of commission or not. There
is no consensus on this point. Some include it in unsecured creditors and some does not include.
Most of the learned persons are of view that since preferential creditors are basically unsecured
therefore they should also be included in unsecured creditors to calculate commission until unless
anything else is provided in question.
If the liquidator has sufficient funds to pay the unsecured creditors, it is easy to calculate
commission. But if the liquidator does not have sufficient funds to pay the unsecured ereditors,
complexity arises in calculation of commission. In such situation the liquidator should calculate the
amount remaining after payment of legal expenses, commission to liquidator on amount realised,
liquidation expenses, payment to preferential creditors and debentureholders. The balance amount
will include payment to be made to unsecured creditors and commission thereon.
Commission will be calculated by following formulae :
Commission = Amount left for unsecured creditors and commission thereon XRate of Commission
100 + Rate of Commission
The commission calculated above will be included in remuneration to liquidator and balance
Will be shown as payment to unsecured creditors. The same procedure will be adopted if
Commission is to be calculated on payment made to equity shareholders.
3. Liquidation Expenses : Liquidation expensSes are paid after payment of remuneration to
liquidator, Generally these expenses are related to realisation of assets.
4. Preferential Creditors : Unsecured creditors who have been given preference fo
Payment u/s 530(1 ) of Companies Act 2013 are paid betore debentureholders and secured creditor
the liquidator has sufficient funds for payment to unsecured creditors, preferential Creditors m:
De paid with unsecured creditors.
5. Creditors havingfloating charge DebenturesholderS are included under it. These a
paid after preferential creditors but before unsecured creditors. Outstanding interest is also pa
with it. If the Company has sufficient funds for payment to unsecured creditors i.e. it is solve
interest is paid upto the date of payment and if the cOmpany is not solvent i.e. whole of
unsecured creditors cannot be paid then interest is paid upto the date of winding up.
 Accounts in Liquidation
1.24 Winding up of Companies and
s: Unsecured creditors are paid after payment to debentureholders, If
6. Unsecured creditors
proportionately.
he company does not have sufficient funds, these are paid is Daid
7. Preference
payment
Canital and Dividend : Preference Share Capital
Share If dividend has been declared on preference shares the dividend is
to debentureholders.
been declared on
paid after payment toto unsecured creditors, If dividend has not cumulative
preference shares they will be paid dividend upto the date of winding up as per the provisions oe
aricles. If there is provision in articles that preference dividend will be paia berore payment
they will
equity share capital, these will be paid first and if the articles are silent in this regard
paid out of balance remaining after payment to equity share capital. If the preference shares are
non-cumulative no dividend will be paid. If nothing is given in question, these will be treated ae:
cumulative and dealt accordingly.
8. Equity Share Capital : If any balance remains after payment of preference share capital
the equity shareholders are paid proportionately. If the equity shares are of different paid up value
naid
shares having highest paid up value will be paid first. In case of calls in advance, the se will be
first. When all shares are having equal paid-up value they will be paid proportionately.
9. Surplus : If anything remains after payment of equity share capital it will be distributed
according to provisions of articles. If there are participating preference shares they will als0 get
share in surplus and remaining will be paid to equity shareholders. If nothing has been provided in
the articles in this respect, whole surplus will be paid to equity shareholders.
The liquidator will make payment upto the extent of funds available with him. If unsecured
creditors cannot be paid, equity share capital will not be shown in the statenent.
:riotin n 21t March 2016 when the follourino