Become a Certified GST Practitioner in just 58 hours. Register Now!

Dissolve Public limited company

Rajendra (CA) (44 Points)

17 February 2023

What is the procedure for dissolving a public limited company? Also how is the cash held by the compay disbursed to promoters?

Thankyou

Reply
Follow
Share

1 Replies

Ayush (Executive ) (6985 Points)
Replied 17 February 2023

The procedure for dissolving a public limited company (also known as winding up or liquidation) can vary depending on the jurisdiction where the company is incorporated, as well as the reason for the dissolution. However, the general steps involved in the process are:

Board Resolution: The first step is for the board of directors to pass a resolution to wind up the company, which should be approved by the shareholders.
Appointment of a liquidator: The company needs to appoint a liquidator, who is responsible for overseeing the winding up process, collecting and selling company assets, paying off creditors, and distributing the remaining funds to shareholders.
Notice to creditors and shareholders: The company should notify its creditors and shareholders of the winding up, and publish the notice in a local newspaper to inform any other interested parties.
Settle outstanding liabilities: The liquidator should identify and settle all outstanding liabilities, including any taxes owed to the government, employee wages, and other debts.
Sell company assets: The liquidator should sell the company's assets, which may include real estate, inventory, and equipment, to generate cash to pay off creditors and distribute to shareholders.
Distribution of remaining funds: After all outstanding liabilities and expenses have been paid, the remaining funds should be distributed to the shareholders in proportion to their shareholding in the company.

Regarding the cash held by the company, the liquidator is responsible for disbursing it according to the company's bylaws and the laws of the jurisdiction in which the company is incorporated. The cash will be used to settle any outstanding liabilities, such as taxes and debts owed to creditors, and the remaining funds will be distributed to shareholders as described above. The specific process for disbursing cash to promoters will depend on the terms of their agreement with the company and any legal requirements that apply.