In every mode of winding up, the liquidator is required to keep proper books to record receipt and payment which is known as liquidator's final statement. The liquidator has to submit a report along with the audited final accounts to the CRO. The liquidator has to submit the statement to the court in the case of compulsory liquidation and to the company in a voluntary liquidation.
The liquidator has to settle down the liability of company on the following priority:
i. Expenses incurred in liquidating the company.
ii. Salaries and wages, provident fund, gratuity and other amounts payable to employees and other workers.
iii. Taxes, charges, fees, royalties etc. payable to the government or to any local autonomous body.
iv. Secured loans obtained against the assets mortgaged to the extent of sum recovered by sale of assets in the market.
v. Other debts.
The surplus, after settling all the debts of the company as stated above, will be distributed first among the preference shareholders and then among the equity shareholders. The equity share holders are distributed the surplus in proportion to the shares held by them.
The specimen of Liquidator's Final Statement is as under:
Liquidator's Statement Of Account
Receipts................................Amount.........Payments..........................Amount
To Assets Realized....................XXX...........By Secured Creditors...........XXX
To Surplus from securities.........XXX...........By liquidation cost................XXX
To Unpaid calls and due calls.....XXX...........By preferential creditors......XXX
.....................................................................By Debenture holders..........XXX
.....................................................................By Unsecured creditors........XXX
.....................................................................By Preference shareholders.XXX
.....................................................................BY equity shareholders.........XXX
Total...........................................XXX...........Total........................................XXX
Receipt Side Of Liquidator's Final Statement
i. Assets Realized: The liquidator would collect the amount by selling the assets of liquidating company. Such an amount received from sold out of assets comes under this heading.
ii. Surplus from securities: It is related with secured creditors. The secured creditors provide the loan against the security. In the treatment of realization from such security, there are possibilities of two situations:
a. Only one surplus amount sent by the creditors.
b. Whole securities realized by the liquidator and later the creditors are paid off.
In the condition a., the liquidator will receive remuneration on the net amount realized. On the condition b., the liquidator would receive the remuneration on the entire amount of securities realized.
iii. Collection of unpaid calls: The liquidator can collect the unpaid calls if there is a shortage of amount to discharge the liability. These unpaid calls are collected from shareholders. Similarly, if there are any due calls, in that case the liquidator can also make calls and can collect money from them.
Payment Side Of Liquidator's Final Statement
i. Secured Creditors: While raising a long term debt, a company may mortgage its property as a security to the debt provider. Such a debt comes under secured creditors. In other words, the secured creditor is such a loan which has been taken from the loan provider on collateral securities.
ii. Liquidation Costs: It is an expense incurred by the liquidator while liquidating the company. It includes liquidator's remuneration and commission and any legal expenses on the process of liquidation.
iii. Preferential Creditors: It is placed in third position in order of payment. It includes the amount payable to government and employees. Taxes, Fees, Electricity charges, Water supply charge etc. are the examples of payable due to government. Similarly, salaries and wages, provident fund, gratuity and other amount payable to the employee are some of the examples of due to employees.
iv. Debenture Holders: It includes the amount of payable to debenture holders with outstanding interest therein. The debenture interest should be paid up to the date of liquidation if it is insolvent and if the company is solvent, the interest on debentures will be paid up to the date of payment.
v. Unsecured Creditors: If the loan is raised by a company without any collateral securities, it is known as unsecured creditors. Bank overdraft, creditors, outstanding expenses etc. are the examples of unsecured creditors.
vi. Payment Made To Shareholders: After paying all the above dues, the turn goes towards the shareholders. Among the shareholders, the first priority must be given to preference shareholders. The preference shareholders will get the principal plus arrear of dividend. The last party to receive anything left, after the payment of preference shareholders, is equity shareholders.
