Every businessperson has a vision of taking the business to a great height. There are times when plans and priorities fail to satisfy ends, resulting in losses and the inability to meet expenditures to fuel the business. There might arise a need to sell off the assets and close down the entire business. For this task, liquidators are nominated. It is the task of the liquidator to get the best business deals possible for the dying company, so that the best deals can be taken care of.
Aim of liquidation
To end all the legitimate actions against the company executives and shareholders by third parties.
To dispose off all the assets and liabilities of the business.
To satisfy all the parties, creditors as well as shareholders.
Who are liquidators?
It refers to a person or an entity responsible for liquidating a company's assets.
In simple terms, the Liquidators are officer assigned the duty of managing the possessions, planning how to sell them, and performing other such functions for winding up an enterprise. They are generally assigned the task by the court, and the liquidator has the full right over all the happenings of the company till the business is saved.
Powers of a liquidator:
He is a licensed practitioner and exercises the right to close the company professionally and ensure a fair percentage to the different parties.
He can explore the reasons for the company's closure and take further decisions regarding assets and liabilities.
To explore all the debts and decide which is to be paid partly and which is to be paid fully.
Valuing company possessions to assess the actual value for liquidation.
Right to fairly distribute funds to the concerned parties and claim own commission.
How are liquidators paid?
Various acts regarding insolvency and liquidation say that the fees of a Liquidators are to be paid earlier, followed by payments to creditors, banks, unsecured creditors, etc. These fees are non-deductible for income purposes.
Duties of a liquidators:
To verify the claims laid by the accounts payable of the company.
To sell off movable and immovable properties by any of the suitable methods. It includes public auctioning of fixed assets.
To acquire professional guidance from any person and ask him to discharge his duties and responsibilities.
Types of Liquidator:
Cvl –Creditor's voluntary liquidation is often confused with creditors. This type of liquidation is initiated by the directors and not the company's creditors. It is most likely that directors in such cases do not have enough cash to pay off the creditors fully.
Member voluntary liquidation: The members of the company started by the fact that it is not insolvent. The company may be closed because of quarrels or completion of the work.
Compulsory liquidation: When the creditors of the company force liquidation upon members. Some liquidators are allowed the freehand to go for compulsory liquidation, whereas others are not.
Who appoints a liquidator?
Under the force of liquidation and increasing debt burden, the company is forced to close its business and appoint the liquidators with the help of the board of directors.
Difference between receiver and Liquidator
The board of directors appoints the liquidators while the court appoints a receiver when a winding-up declaration has been received.
The receiver acts on behalf of both the company and the creditor, while the Liquidator acts on behalf of either shareholders or creditors.
Receivership ends the involvement of the company owner in the liquidation and debt restructuring, which is not the case in the presence of a liquidator.
Conclusion:
Liquidation is a challenging task. It demands businesses lose their worth and dissolve themselves. With the help of liquidators, a fair distribution of every business resource could be done, and there’s no discrepancy.