Question

b) Explain the different forms of liquidation.

Answer 1

Liquidation is the process of dissolving a company by utilising the assets of the company to pay to it's creditors.

Three types of liquidation :-

1. Compulsory liquidation - when a company is not able to pay it's debt then winding up orders are issued by the court or creditors of the company may decide to petition for a winding up order. Also, it will not be able to use liquidations online to commence a compulsory liquidation.

2. Members' voluntary liquidation - creditors voluntary liquidation is done when the creditors are agree, not all creditors may agree but a 75% majority vote will secure the deal and even if some of creditors do not vote they are still bound to it.

3. Creditors' voluntary liquidation - This is the most favoured route of liquidation. It is an insolvent type of liquidation. When a company is unable to pay it's debt then creditors voluntary liquidation is done. The liquidators takes control of the company and oversees the liquidation process.