Compulsory winding up takes place when a creditor of an insolvent company asks the court for a wind up. If the company goes into liquidation, the court of law appoints a liquidator for the liquidation.
● The primary objective of the liquidator is to raise as much funds as needed to pay the creditors.
● The company will then be dissolved and its name will be struck off from the list of companies in the registrar’s office.
● Any surplus money left will be distributed amongst the shareholders of the company.
● This legal process ends with the company’s name struck off from the list of companies in the registrar’s office.
● After the name is struck off, the company ceases to exist anymore.
Winding up involves the following −
● Every contract of the company, including individual contracts are completed, transferred or ended. The company is no more able to do business.
● Any outstanding legal disputes are settled.
● All the assets of the company are sold.
● Money owed to the company, if any, is collected.
● Funds raised are distributed to the creditors.
● Surplus funds left after all the transactions are distributed amongst shareholders.