What is the difference between dissolving and liquidating a company

Winding up is a process whereby all assets of the company are realised and used to pay off the liabilities and members.

Dissolution of the company takes place after the entire process of winding up is over.

The most important difference between bankruptcy and winding up is that in a bankruptcy proceeding the property of the bankrupt passes to a trustee who is appointed by a court to sell the property to pay the debts of the bankrupt party.

However, in a winding up of a company, all the assets of the company still remain with the company until its dissolution, unless disposed of in the course of winding up by the liquidator.

Closing down a solvent company in South Africa is referred to as “liquidation” in common law terms.

It involves a certain number of formal steps and the overall process can take months to complete.

It will usually take between /- 3 to 7 months for the Companies and Intellectual Property Commission (CIPC) to effect the deregistration.

Whereas Indian law does not define bankruptcy, it defines winding up under the (Indian) Companies Act, 1956 (the Act).

The dissolution process can be less expensive than other alternatives, particularly when litigation or disputes over claims is unlikely. Under Delaware law, once the dissolution commences the corporation is no longer permitted to operate as a normal business.

Instead, as the Delaware statute provides, the corporation continues only “gradually to settle and close their business, to dispose of and convey their property, to discharge their liabilities and to distribute to their stockholders any remaining assets, but not for the purpose of continuing the business for which the corporation was organized.” The corporation is allowed up to three years to complete the dissolution process; if more time is required, a request has to be made to the Delaware Court of Chancery (although a corporation in dissolution remains in existence, without having to go to the Chancery Court, to complete lawsuits that are pending when the three year period expires). To give you a sense of the process involved, below is a list of some of the main steps in a dissolution.

In the event of an Indian company registered under the Act becoming insolvent, it is winding up that is applicable.

These provisions apply equally to a listed company, a public limited company as well as a private limited company.

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