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Winding up and Liquidation

When a company closes down, there are many things that need to be taken care of, such ending all business activities and selling company stock and assets. This process is referred to as ‘winding up’ the business. As a subset of winding up, liquidation is the process where assets are sold. Liquidation only happens for companies that are ceasing to operate. Whether these companies are solvent or insolvent, winding up a company will almost always involve liquidation.

Winding up a company means to end all business affairs in order to permanently close a company. This process involves many things, such as selling off stock, distributing the remaining assets, and paying off any outstanding debts. There are different types of winding up such as:-

Winding

up and Liquidation

  • Voluntary winding up- Directors can wind up a solvent company voluntarily if they vote to do so. To do this, directors of the company must declare that the company is solvent. After this, members must pass a vote with a 75% majority to wind up the company.
  • Involuntary winding up- It is illegal for a company to continue trading when it is insolvent, meaning that action must be taken as soon as possible.

In commercial terms, liquid means cash. Liquidation is the process of converting assets to cash, usually in order to pay back debts or shareholders

Winding up and liquidation both signify the end of a company. While winding up is the broader process of concluding all business affairs, liquidation is a necessary part of this process which sells off the company’s assets.

We as a professional firm provide all the process in relation to winding up of the company.

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