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Unit 9: Fundamentals of Liquidation of Companies

Self Assessment Notes

Choose the correct answer from the following options:
13. A company limited by shares can be liquidated under:

(a) Section 425 of the Companies Act, 1956.
(b) Section 428 of the Companies Act, 1956.
(c) Section 10 of the Presidency Towns Insolvency Act, 1909.
(d) Section 428 of the Companies Act, 1956.

14. A contributory is a:
(a) Creditor
(b) Debenture-holder
(c) Shareholders
(d) Bankers

15. Preferential creditors of a company at the time of liquidation are in the nature of:
(a) Fully secured creditors.
(b) Unsecured creditors who have priority of claims over other unsecured creditors
(c) Fully unsecured creditors

(d) Partly secured creditors



Case Study Multi State Wind Down-Creditors’ Voluntary Liquidation

rior to liquidation the company had operations in Victoria and also regional
(Newcastle) New South Wales. Its financial operations were conducted in Victoria and
Pits manufacturing was conducted in New South Wales. Due to this we were dealing
with employees and creditors from both states. Apart from book debts the major asset of
the company was its plant and equipment at its manufacturing site in Newcastle. Upon
appointment we immediately secured the plant and equipment. Due to our knowledge of
the industry we were able to work with a National firm of valuers and auctioneers who
were able to coordinate the changing of locks and taking an inventory of the assets located
in New South Wales and Victoria.
We also met with the management team from Newcastle and ascertained the general
manager (who was not a director or shareholder) was responsible and trustworthy and we
retained his services to facilitate the sale of the assets. Initially it was thought that the assets
would be sold by way of public auction and the premises vacated however after advertising
the business for sale as a whole we entered into negotiations and were able to successfully
sell the business and its assets for considerably higher than auction realisation value. Whilst
some employees were successful in obtaining employment with the purchaser the majority
were not. However the sale price achieved will enable the claims of the employees, many
of whom were long standing employees with significant entitlements to receive the bulk
of the monies outstanding including paying their superannuation entitlements in full. The
employee entitlements including superannuation amount to approximately ` 350,000.
Contd...

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