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The company is unable to pay its debts as they fall due; It is just and equitable to wind up the company, as for an example specified by an insolvency act [4] In practice, the vast majority of compulsory winding-up applications are made under one of the last two grounds. [5]
Dissolution is the last stage of liquidation, the process by which a company (or part of a company) is brought to an end, and the assets and property of the company are gone forever. Dissolution of a partnership is the first of two stages in the termination of a partnership. [1] "Winding up" is the second stage. [1] [2]
A Texas divisive merger achieves the opposite result: instead of two companies joining to become one, one company splits to become two. Corporate divisions or spin-offs are allowed in many jurisdictions, but the Texas divisive merger is distinctive because it treats the division as a merger. [ 1 ]
Liquidations generally come in two forms — either compulsory liquidations (sometimes called creditors' liquidations) and voluntary liquidations (sometimes called members' liquidations, although a voluntary liquidation where the company is insolvent will also be controlled by the creditors, and is properly referred to as a creditors' voluntary ...
When a company became insolvent liquidation followed because that was the consequence of the only insolvency legislation which then existed - the Bankruptcy Act and the Winding-Up Act. Almost inevitably liquidation destroyed the shareholders' investment, yielded little by way of recovery to the creditors, and exacerbated the social evil of ...
Insolvency is divided into two categories: cash flow and balance sheet. You can claim balance-sheet insolvency to the IRS if your liabilities exceed the fair market value of your assets.
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There are two court procedures: first, a procedure for a company that is not yet insolvent, known as a protective composition, and second, a formal bankruptcy that is split into a rescue process (similar to protective composition) or liquidation. [35] Directors of a company can be held personally liable for its debts. [36] [37]