Rules for liquidating
Property which is held by the company on trust for third parties will not form part of the company's assets available to pay creditors.
This is used, for instance, when a retail establishment wants to close stores.They will sell to a company that specializes in store liquidation instead of attempting to run a store closure sale themselves.The parties who are entitled by law to petition for the compulsory liquidation of a company vary from jurisdiction to jurisdiction, but generally, a petition may be lodged with the court for the compulsory liquidation of a company by: The grounds upon which one can apply for a compulsory liquidation also vary between jurisdictions, but the normal grounds to enable an application to the court for an order to compulsorily wind-up the company are: A "just and equitable" winding-up enables the grounds to subject the strict legal rights of the shareholders to equitable considerations.The liquidator must determine the company's title to property in its possession.Property which is in the possession of the company, but which was supplied under a valid retention of title clause will generally have to be returned to the supplier.The process of liquidation also arises when customs, an authority or agency in a country responsible for collecting and safeguarding customs duties, determines the final computation or ascertainment of the duties or drawback accruing on an entry.
Liquidation may either be compulsory (sometimes referred to as a creditors' liquidation) or voluntary (sometimes referred to as a shareholders' liquidation, although some voluntary liquidations are controlled by the creditors, see below).
For example, a party who had a valid contract for the purchase of land against the company may be able to obtain an order for specific performance, and compel the liquidator to transfer title to the land to them, upon tender of the purchase price.
After the removal of all assets which are subject to retention of title arrangements, fixed security, or are otherwise subject to proprietary claims of others, the liquidator will pay the claims against the company's assets.
75 percent of the company's shareholders must agree to liquidate for liquidation proceedings to advance.
If the company is solvent, and the members have made a statutory declaration of solvency, the liquidation will proceed as a members' voluntary winding-up.
A creditors’ voluntary liquidation (CVL) is a process designed to allow an insolvent company to close voluntarily.