Winding Up: Meaning, Modes, Voluntary Winding Up and Liquidator (Basics) Questions

Question 1

Define winding up.

Accepted Answer

Winding up is the legal **process** of closing a company by realising assets, paying liabilities and distributing any surplus (concept).

Question 2

What is dissolution?

Accepted Answer

Dissolution is the final end where the company **ceases to exist** as a legal entity after winding up (concept).

Question 3

Who is a liquidator?

Accepted Answer

A **liquidator** is the person appointed to conduct winding up by taking control of assets, settling claims and distributing surplus (concept).

Question 4

Name any one mode of winding up (concept).

Accepted Answer

**Voluntary winding up** (or compulsory/tribunal winding up) (concept).

Question 5

Winding up is a process; dissolution is the final result. (True/False)

Accepted Answer

True. **Winding up** is the process; **dissolution** is the final termination (concept).

Question 6

State one primary function of a liquidator.

Accepted Answer

To **realise assets** and use the proceeds to settle liabilities in the winding up process (concept).

Question 7

Differentiate winding up and dissolution using a table (any three points).

Accepted Answer

Winding up vs dissolution:

| Basis | **Winding up** | **Dissolution** |
|---|---|---|
| Nature | liquidation **process** | final end/termination |
| Legal status | company exists for settlement | company ceases to exist |
| Focus | realise assets, pay debts | end of corporate life |

Thus, dissolution comes after winding up is completed.

Question 8

Explain modes of winding up (concept) with a small table.

Accepted Answer

Modes of winding up (concept):

| Mode | Meaning |
|---|---|
| **Voluntary** | company chooses to wind up via resolution |
| **Compulsory/tribunal** | winding up by order of authority |

Hence, winding up may be voluntary or ordered by an authority (concept).

Question 9

Write the voluntary winding up process as a flowchart and explain briefly (exam-style).

Accepted Answer

Voluntary winding up (flow):

Resolution/decision → Appoint **liquidator** → Realise assets → Settle liabilities → Distribute surplus → Final report → Dissolution

Briefly, the liquidator manages liquidation so creditors are paid first and any surplus is distributed (concept).

Question 10

State any three powers/duties of a liquidator using a table.

Accepted Answer

Powers/duties of liquidator (any three) (concept):

| Area | **Power/Duty** |
|---|---|
| Custody | take control of assets and records |
| Realisation | sell/realise assets |
| Settlement | verify and pay liabilities |
| Reporting | maintain accounts and reports |

Any three points can be written in exams.

Question 11

Explain voluntary winding up: meaning, reasons and process (exam-style) with a flowchart and conclusion.

Accepted Answer

### Meaning
**Voluntary winding up** is winding up initiated by the company’s own decision (resolution) (concept).

### Reasons (concept)
- business purpose completed
- restructuring decision
- financial difficulties

### Process (flowchart)
Decision/Resolution → Appointment of **liquidator** → Asset realisation → Liability settlement → Surplus distribution → Final report → Dissolution

### Conclusion
Voluntary winding up provides an orderly exit by ensuring proper settlement of creditors and lawful distribution of surplus (concept).

Question 12

Explain the role of a liquidator in winding up (exam-style) with a table and conclusion.

Accepted Answer

### Role of liquidator (concept)
The liquidator is responsible for conducting the winding up and safeguarding stakeholder interests.

| Function | What the liquidator does |
|---|---|
| **Control** | takes custody of assets/records |
| **Realisation** | sells assets to generate funds |
| **Settlement** | verifies claims and pays liabilities |
| **Distribution** | distributes surplus as per priorities |
| Reporting | maintains accounts and prepares reports |

### Conclusion
A competent liquidator ensures transparent liquidation, creditors’ protection, and lawful dissolution of the company.

Question 13

Differentiate compulsory/tribunal winding up and voluntary winding up (exam-style) with a table and conclusion.

Accepted Answer

### Comparison (concept)

| Basis | **Voluntary winding up** | **Compulsory/tribunal winding up** |
|---|---|---|
| Initiation | company decision/resolution | authority/tribunal order |
| Trigger | internal decision, business closure | legal grounds and order (concept) |
| Control | liquidator under voluntary process | liquidation under ordered process |

### Conclusion
Voluntary winding up is self-initiated, while compulsory winding up is imposed through an authority order based on legal grounds (concept).

Question 14

Write an exam-style note on the priority principle in winding up (creditors-first) using a small table and conclusion (concept).

Accepted Answer

Priority principle (concept): payments follow a **creditors-first** logic.

| Stage | Who is paid (concept) |
|---|---|
| 1 | priority/secured claims |
| 2 | other creditors |
| 3 | shareholders (only if surplus) |

Conclusion: owners receive funds only after liabilities are settled.

Question 15

State any three reasons for winding up a company (concept) using points or a small table.

Accepted Answer

Reasons for winding up (any three) (concept):

- business purpose completed / company no longer needed
- continuous losses / inability to pay debts (concept)
- restructuring decision by members
- disputes or deadlock in management (concept)

Any three reasons with brief explanation are sufficient in exams.

Basis	Winding up	Dissolution
Nature	liquidation process	final end/termination
Legal status	company exists for settlement	company ceases to exist
Focus	realise assets, pay debts	end of corporate life

Winding Up: Meaning, Modes, Voluntary Winding Up and Liquidator (Basics)

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