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The difference between winding up and dissolution

Winding up and dissolution are related and two parts of the process which leads to a company ceasing operations and paying off creditors.

At a fundamental level, winding up is a process whereby a liquidator is appointed to settle and distribute the assets of a company to the people it owes money to as well as its shareholders before eventual dissolution.

Once the company is wound up, it is dissolved and struck off the Register of Companies by the authorities and the event is announced formally in the Government Gazette.

As soon as a liquidator is appointed, all powers of the company, board of directors and secretary are revoked and placed with the said liquidator.

The liquidator can be nominated by the company or its creditors. If the creditors nominate a different candidate, it will be their choice as to who is appointed. On the flip-side if the creditors do not nominate a liquidator, the company’s choice is appointed.

If the winding up process takes longer than one year, the liquidator must summon a general meeting of the company as well as a creditors meeting.

The winding up process includes a summary of all assets and the intended distribution to the creditors as well as an auditor’s report.

The company’s liabilities will be settled through the distribution of company property and assets, adhering the the pari passu (equal footing) rule to ensure fairness and transparency.

In addition, the liquidator’s fee will be payable out of the assets of the company. When the whole plan is laid out, it is time to move on to dissolution and striking the company off the register.

As soon as the Registrar of Companies receives a copy of the account of the winding up process, the way in which the distribution will take place, as well as the auditor’s report, they can proceed with the striking off process.

Once the documents are registered, the company is formally struck off the list and ceases to exist.

Put into very simple language, the process of winding up and dissolution is seeing who is owed what and how the company assets can be liquidated to pay their dues. This process is bolstered by the auditor’s report, which basically affirms that all has been done fairly and in accordance with procedure.

The actual dissolution of the company is the final act by the authorities which strikes the company off the list and declares it to no longer be in existence. Winding up is the process that leads up to the dissolution of a company.

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