Unit - 3
Liquidation of a Company
Q1) Define Winding up of the company. In what ways a company can be liquidated?
A1)
Meaning:
A company comes into existence through a legal process and also it comes to end by law. The legal procedure through which the existence of a company comes to an end is known as ‘Liquidation’.
Definition:
As per Sec 2(94A) of the Companies Act, 2013, winding up means winding up under this Act or liquidation under the Insolvency and Bankruptcy Code, 2016.
A Company may be liquidated
- Voluntarily
- Compulsorily
A company can be voluntarily wounded
- If the company passes a resolution in general meeting
- As the period has expired of its duration, if any, fixed by its Articles or
- On occurrence of some event and on happening of which, the Articles provide for its dissolution
- If the company passes a special resolution for voluntarily winding up of the company.
A company can be compulsorily wounded by
- Tribunal
- Filing a petition
- By Contributory
- By Registrar
- By the Company
To the tribunal.
Q2) Define Holding Company and Subsidiary Company.
A2)
In the current phase of economic and business growth, many organizations are growing into large corporations by way of acquisition or mergers. To achieve this objective, formation of holding company is an important tool.
DEFINITIONS:
As per section 2(46) of the Companies Act, 2013, ‘Holding Company’, in relation to one or more other companies, means a company of which such companies are subsidiary companies.
Section 2 (87) of the Companies Act, 2013, defines ‘Subsidiary Company’ as a company in which the holding company –
- controls the composition of the board of directors or
- exercises or controls more than one half of the total share capital either at its own or together with one or more of its other subsidiary companies.
Q3) What is the purpose of preparing Consolidated Financial Statements?
A3)
Consolidated Financial Statements (CFS)are the financial statements of a group presented as those of a single enterprise, where a group refers to parent and all its subsidiaries.
The Parent Company need to inform the users of its financial statements, about the financial position and results of operations not only of their enterprise itself but also of the group as a whole. For this purpose, Consolidated Financial Statements are prepared by a parent that is holding enterprise; to provide financial information about a parent and its subsidiary or subsidiaries as a single economic entity.
CFS normally includes Consolidated Balance Sheet, Consolidated Statement of Profit and Loss and Notes and Schedules. Consolidated Cash Flow Statement also needs to be prepared, in case the Holding Company prepares its own Cash Flow Statement.