What's the difference between dissolution and liquidation?

What's the difference between dissolution and liquidation?

 

Organizations in the India might be shut down in various manners, contingent upon their financial position. Regardless of whether a business is dissolvable or insolvent is the main issue to consider, however in the two cases, business resources are sold and the organization closes.

Both liquidation and disintegration are methods for shutting down a business you never again need. But, there are some key differences between the two procedures which influence the way wherein the organization is shut and also your ability to claim director redundancy . Here are a portion of the key differences  you ought to know about:

DISSOLVING A COMPANY

This is the standard strategy for striking off an organization that either has never traded or has quit trading and is presently torpid. You needn't bother with a liquidator to dissolve an organization, you can simply complete form STK-2  (accessible for nothing from Companies House), submit the form and hold up the two months to ensure no lodge an objection.

There are different principles to ensure investors and lenders who should all be pulled out of the expectation to apply for striking off. There are additionally fines, conceivable chief exclusions and detainment in the event that you apply to hit off with the expectation of covering this from lenders or different gatherings so care should be taken to pursue the techniques spread out by Companies House.

Dissolution is a legal concept that refers to the formal death of the company. Once a company completes the dissolution process, it is no longer a formal legal entity. A company can be dissolved voluntarily by its owners or involuntarily by the secretary of state in the state in which it is registered for failure to pay taxes. Additionally, creditors can petition a court to force a company into dissolution.

The Dissolution of a company may take place in two ways. First in which the company is transferred to another company under the scheme of reconstruction or amalgamation. In such a case, the transfer of company will be dissolved by an order of Tribunal without it being wound up. In second scenario, the company shall undergo winding up process where the assets of the company shall be realized and proceeds shall be used to pay its liabilities. Once the debts have been settles, the remaining amount, if any, shall be distributed amongst the stakeholders and Tribunal shall pass the order of dissolution of the company and strike its name off the register of Registrar of the Companies.

 

LIQUIDATING  A COMPANY

This procedure is utilized where there are unpaid liabilities to creditors and the organization should be shut down. There may likewise be advantages for be sold and worker's professes to manage. Representatives have exceptional rights in liquidation and might be qualified for money related cases, and these can as a rule be asserted from the proper government subsidize.

The chiefs ought to pick a vendor who will be a Licensed Insolvency Practitioner to help them. It is significantly more muddled than the striking off procedure above, as gatherings should be called of the investors and notification sent to all loan bosses. Likewise, there will be resources and liabilities that should be managed. It isn't extraordinary for the liquidation procedure to take as long as a year once everything has at long last been managed and the organization can be at last struck of

When a company goes out of business, it must first wind up its business activities. Few businesses can simply close their doors the instant they decide to go out of business. Instead, they may have to manage long-term commitments with the owners of property they are leasing, employee payroll, long-term contracts and sales commitments.

Winding up of a company is judged by the Tribunal and the procedure for winding up of a company in India which is purely a judicial function. There is a liquidator who carries off and administers the winding up process. After winding up, the dissolution process takes place. The dissolution of a company is submitted by registrar of companies. This is a purely administrative function and do not involve any role for the liquidator. Dissolution is a necessary step following the winding up of a company

Basic Difference between dissolution and liquidation of a company in India:

Dissolving is the process of removing or “striking off” a company from the register at Companies House.

In situations where a company has become surplus to requirements (i.e. it has fulfilled the purpose it initially set out to achieve) and is no longer trading. The most cost-effective and simple way forward for a director may be to apply to the Registrar to be struck off and dissolved.

Liquidation is when a company’s assets are extracted and used to pay off any remaining debts before that company is dissolved.The company liquidation in India refers to the process through which companies registered here are shut down due to various reasons. Investors may liquidate a company as a consequence of various economic problems and debts. The liquidation procedure is given by the Insolvency and Bankruptcy Code, which can be detailed by our team of consultants in company formation in India.

The liquidation can be started on a voluntarily basis through the intervention of the company’s creditors or other members. If this case will apply, the procedure can be completed without the intervention of a local court and our team of specialists in company formation in India can assist with further advice on the manner in which the procedure is performed.

Final Say:

When dissolution occurs then it will also removed his company's existence from the registrar's record and never further start his business on that name of company. But, When liquidation occurs ,it occurs to pay off his liabilities by liquidating his all assets of the company and does not removed his company's name from the registrar's record and in future he may start his business on that company's name and continue his business.

We hope this blog will give you clear insight between dissolution and liquidation of the company. If you are looking for the legal advisor who can help you in closing company, feel free to contact to Unilex Business Consultant.