Broadly speaking, the liquidation process is as follows: There is a hierarchy that determines the order in which a company's assets must be distributed in a liquidation. Any secured creditors have the first right to the assets and are usually paid out before there is a distribution.A partnership starts with an agreement between two or more people who want to go into business together.Voluntary liquidation refers to the process whereby the shareholders appoint a liquidator, who is then answerable to the creditors or shareholders.It is not necessary to make any application to the court for this; however, the liquidator may apply to the court for directions and the court has power to remove a liquidator.A voluntary liquidation may also by commenced by the board of directors if an event specified in the company's constitution has occurred.Voluntary liquidation may be in one of two forms, depending on whether or not the company is solvent.Liquidation (or "winding up") is a process by which a company's existence is brought to an end.First, a liquidator is appointed, either by the shareholders or the court.
The liquidator supervises the liquidation, which involves collecting and realising the company's assets (turning them into cash), discharging the company's liabilities, and distributing any funds left over among the shareholders in accordance with the company's constitution (or the COMPANIES ACT 1993 if there is no constitution).
The court will require proof of solvency or insolvency to determine this matter.
Compulsory liquidation of a company requires obtaining a court order.
Applications by creditors are by far the most important and common.
Applications may be brought on a number of grounds, the most important being that the company is unable to pay its debts.