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Simply put, liquidation is the process by which a company shuts down its activities. The company may decide to close down for a variety of reasons, including a refusal to continue operations, insolvency, and so on. The word ‘liquidation of a company’ refers to the process of selling a company's assets. The company can sell its assets to meet obligations and repay liabilities.
If a company is liquidated due to bankruptcy, the liquidator can sell its assets to repay all pending liabilities. The remaining balance, if any, after repayment to the creditors, gets distributed among the shareholders of the company.
Winding up of a private limited company can be done in 2 different ways. They are:
Identically, if any official of the company files a petition to a court or a tribunal, or if the company has indulged in any fraudulent/unlawful activities, it must be wound up compulsorily
Company Limited by Shares
A company limited by shares refers to a company which issues shares to the public.
A company is a legal entity established by a group of individuals engaged in business—commercial or industrial—enterprise and its activity.
Liquidate means to convert assets into cash or cash equivalents by selling them on the open market.
Voluntary liquidation is a self-imposed winding up and dissolution of a company that has been approved by shareholders.
A stock is a form of security that indicates the holder has proportionate ownership in the issuing corporation.