Winding up (liquidation) is the legal process of closing a company by collecting its assets, paying liabilities, and distributing any surplus. It is different from immediate closure: winding up is a process, and dissolution is the final end.
In exams, this topic is frequently asked as:
You should be able to:
Winding up is the process by which a company’s affairs are brought to an end by:
Key idea: company continues as a legal entity during winding up for limited purposes, mainly liquidation and settlement.
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Winding up vs dissolution:
Thus, dissolution comes after winding up is completed.
Modes of winding up (concept):
Hence, winding up may be voluntary or ordered by an authority (concept).
Corporate law (also known as business law or enterprise law or sometimes company law) is the body of law governing the rights, relations, and conduct of persons, companies, organizations and businesses. It thus encompasses the formation, funding, governance, and death of a corporation.
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Winding up (liquidation) is the legal process of closing a company by collecting its assets, paying liabilities, and distributing any surplus. It is different from immediate closure: winding up is a process, and dissolution is the final end.
In exams, this topic is frequently asked as:
You should be able to:
Winding up is the process by which a company’s affairs are brought to an end by:
Key idea: company continues as a legal entity during winding up for limited purposes, mainly liquidation and settlement.
Common modes (write conceptually if sections are not required):
Some syllabi also mention “winding up under supervision” as an older classification (concept).
Voluntary winding up is when the company chooses to wind up without being forced by an authority, usually because:
Key characteristics:
Decision to wind up → Resolution (members/creditors as applicable) → Appointment of liquidator → Public/statutory intimation (concept) → Realisation of assets → Settlement of liabilities → Distribution of surplus → Final report/accounts → Dissolution
Exam tip: use this one-line flowchart + 4–5 bullet points to score full marks.
A liquidator is the person appointed to conduct the winding up by taking control of company assets, settling claims, and distributing surplus (concept).
Role summary:
In winding up, payments generally follow a priority logic (concept): secured/priority claims → other creditors → shareholders (if surplus remains).
Don’t write exact priority list unless your syllabus demands it; the safe scoring point is the creditors-first principle.
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Voluntary winding up is winding up initiated by the company’s own decision (resolution) (concept).
Decision/Resolution → Appointment of liquidator → Asset realisation → Liability settlement → Surplus distribution → Final report → Dissolution
Voluntary winding up provides an orderly exit by ensuring proper settlement of creditors and lawful distribution of surplus (concept).