Question

Analyse the procedures regarding external administration and winding up.

Answer 1

Ans- External adminstartion includes , adminstration, receivership and liquidation, these process are used to close down the affairs of an insolvent company

External administration means say of creditors in management, when creditors are included in administration ,

Creditors are those persons who owed money to the compnay , by providing goods or services or short and long term credit or loans. They are basically of two types

Secured- who have charge or mortgage on companies assets

Unsecured- who do not have kind of security over thier amount of loan or debt,

When a company is unable to pay its debts, it may place into administration by voluntaryr by directors by creditors

i) voluntary administration- An independent qualified administrator appointed who investigate into affairs of company and  report to creditors, it is generally done to save the business

Procedure

a. To end voluntary administration and give back compnay to directors

b. To approve a deed by which company agrees to pay debt in full or in part

c. Wind up and appoint liquidator

ii) Receivership- When a company suffers from inability to pay its debt, a secured creditor may (Bank) may put the compnay into this stage,

A qualified and independent receiver appointed to look into the matter to control over all or some of the assets of company

Procedure-   

a) sell the assets or business of the company which is sufficient to pay the secured debt

b) Pay the collected money in order specified by the court of law

c) Report the proper authority in case of any irregularity found or offence

iii) Liquidation (winding up) - When a compnay is not able to pay its debts, creditors or court of law may put the compnay into liquidation , it is the process by which the assets are relaized and money is paid to creditors in order specified and legal status of the company comes to the end

A qualified independent person is appointed called liquidator, Procedure used by liquidator during winding up

a) Collect all the assets of the company and convert them into cash

b) Prepare report on affiars of the compnay and report to creditors

c) Inquire the failures of the compnay their reasons and report to proper authority

d) After adjusting the cost of liquidation, and secured debts, distribute the available among employees and unsecured creditors

e) Apply for deregistration after completion of process of liquidation.