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Consequences of Winding up of a company

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Liquidation or winding up is a legal term and refers to the procedure through which the affairs of a company are wound up by law. Winding up of a company has been defined in the companies Act 2013 as the process whereby its life is ended and its property is administered for the benefit of its creditors and members.

 Following are the consequences of winding up:

 1. An officer who is called as a liquidator is appointed and he takes over the administration of the company. In case of compulsory winding up, the official liquidator attached to the High Court, functions as liquidator of the company. In case of voluntary winding up by members, such an official is appointed bu the members and in case the voluntary winding up is by creditor, both the members and creditors may appoint such an official.

 2. The powers of the board of directors will cease and will now vest the liquidator.

 3. Winding up order or resolution of voluntary winding up shall operate as a notice of discharge to all members of the company. The members of the company will be known as contributies.

 4. Liquidator of the company will prepare a list of the contributories who may be made liable to contribute to the assets of the company in case assets are not sufficient to meet the claims of various claimants. In case there is a surplus ion the assets, the liquidator of the company will prepare a list of those members who are entitled to share this surplus.

 5. Liquidator of the comapany will collect and realise its assets and distribute the proceeds amonng right claimants as per the procedure of the law.

 6. Winding up ultimately leads to dissolution of a company. The life of the comapny will come to an end and it will no longer be an artificial person in the eyes of the law.

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