Page 199 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Accounting for Companies – II

notes Prior to settling the sale negotiations we had to deal with various issues including retention
of title claims on various assets, resolve a dispute in relation to the ownership of intellectual
property and have all the plant and equipment inspected so as to comply with the relevant
occupational health and safety requirements. In order to avoid long and costly litigation
we settled with the various parties claiming retention of title and ownership of intellectual
property on a commercial basis which allowed the sale to proceed, the monies collected
and the small amount required to be paid to the various parties to settle the disputes was
considerably less than if we had have litigated the matter when taking into consideration
the costs of litigation, the delay caused and the fact that we would have lost the opportunity
to sell the assets for a higher price than auction.
Questions
1. Discuss the case situation in brief.
2. Analyse the consequences for the same.

Source: http://www.brookebird.com.au/index.php?option=com_content&task=view&id=45
9.6 summary

l z Liquidation means putting an end to the life of the company.
l z The assets of the liquidated company are administered for the benefit of the members and
creditors.
l z A company can be compulsory wound up by the National Company Law Tribunal.
l z The various circumstances under which a company can be compulsorily wound up like-
Inability of the company to pay its debt; Reduction in number of membership; if the
company does not commence its business within a year from its incorporation or suspends
its business for a whole year, etc.

l z Voluntary winding up are of two types – Members’ voluntary winding up and Creditors’
voluntary winding up.

l z Contributory means a person who is liable to contribute to the assets of the company in the
event of its being wound up and includes holders of shares which are fully paid.
l z Liquidator is the person who is appointed to administer the process of liquidation of a
company.

l z Preferential payments mean the payments to be made in preference to all other debts
according to the provisions of the Companies Act.
9.7 keywords

Contributory: A contributory means a person liable to contribute to the assets of the company in
the event of its being wound up and includes holders of shares which are fully paid.
Instalment Installation: Assets are sold on a piece meal fashion and available cash are distributed
first to creditors then to partners.
Liquidation: It refers to the winding up of the affairs of the partnership. This leads to sale of all
non-cash and payment to creditors and to partners.
Liquidator: A liquidator is a person who is entrusted the duty of winding up of a company. He
is appointed to administer and to take control of the company.
Lump-sum Liquidation: All assets are converted into cash, and then payments are made first to
creditors then to partners.
Preferential Payments: Preferential payments are those payments which by virtue of provisions
in the Act are to be paid in priority to all other debts.

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