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Accounting for Companies – II Ashwani Panesar, Lovely Professional University

notes unit 10: liquidation of companies: preparation of accounts

contents

Objectives
Introduction
10.1 Process of Liquidation
10.2 Primary Duties of Liquidators
10.3 Liquidators’ Statement of Account
10.3.1 Preparation of Liquidator’s Final Statement Account

10.4 Liquidator’s Remuneration
10.5 List B Contributories
10.6 Summary
10.7 Keywords

10.8 Review Questions
10.9 Further Readings

objectives

After studying this unit, you will be able to:

l z Discuss the process of Liquidation
l z Describe the primary duties of Liquidators
l z Explain the Liquidator’s statement of Account
l z Discuss the liquidator’s remuneration concept

l z Describe the concept of List B Contributories
introduction

A company is an artificial legal entity. It cannot live and it cannot die. Its effective birth is
registration and its effective death is dissolution. Liquidation is simply the process by which a
company’s assets are realised and distributed to those parties legally entitled to them, so that it
can be dissolved. A Voluntary Liquidation is one which has been instigated by the passing of a
resolution by the shareholders, as opposed to a winding up order made by the court, generally
at the behest of an unpaid creditor. A Creditors Voluntary Liquidation is a voluntary liquidation
where the directors cannot make the Statutory Declaration of Solvency necessary for a Member’s
Voluntary Liquidation i.e. It is insolvent, in that it will be unable to pay its debts in full.
It is vital that, in the period between the calling of these meetings and actually holding them,
the directors (who remain in control of the company) exercise appropriate caution and take the
advice of the proposed Liquidator. There is no embargo on continued trading, although the
company cannot accept deliveries of goods for which it has not made provision for payment. It is
necessary, during this period, not to improve or worsen the position of any individual creditors,
or to dissipate any of the assets, otherwise the directors could have either personal liability or
be culpable for misfeasance. In particular, it is vital to ensure that assets that ought to be made
available to the Liquidator do not fall into the hands of creditors and thus become available for
set off.

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