Distribution of assets-liquidation of companies, Financial Accounting

Distribution of Assets

1. Proof of debts:

If the company is insolvent, the rules in bankruptcy as to provable debts, secured creditors, interests, mutual dealings, annuities and contingent claims apply ss. 309, 310: if the company is solvent all claims enforceable at the commencement of winding up are provable. In compulsory liquidation the rules in bankruptcy as to the method of proving debts apply: formal proof is not necessary in voluntary liquidation.

2. Preferential debts:

These are almost the same as in bankruptcy, with the addition that any person who has advanced money for the payment of wages has the same priority as the person receiving payment out of the advance would otherwise have had s.311. The "relevant date" for calculating these debts is the date of the resolution to wind up, or the date of the winding-up order or of the appointment of a provisional liquidator. There are no pre-preferential debts in liquidation, and the only deferred debt is interest in excess of 6 per cent per annum.

3. Dividends:

In compulsory liquidation, the rules are the same as in bankruptcy, except that they are payable "as and when" there are assets available. In voluntary liquidation dividends are paid without formality at the discretion of the liquidator.

4. Unclaimed assets:

Money representing unclaimed dividends or undistributed assets must, after six months, be paid into the Companies Liquidation Account : any person who later claims the assets may apply to the O.R. for payment, which will be made on certification by the liquidator: any property of a dissolved company (unless held on trust for some other person) vests in the government as bona vacantia s.340 subject to the Crown's right of disclaimer s.341. The books and papers of the company may be disposed of as directed by the court, the members or the creditors, but the court may order their preservation for up to five year from dissolution s.332.

Posted Date: 12/13/2012 2:53:42 AM | Location : United States

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