Powers and Duties of a Liquidator | Company

In this article we will discuss about the powers and duties of a liquidator of a company. Also you will learn about the order of payment by a liquidator.

Powers of Liquidator:

Subject to certain legal provisions and adherence to certain procedures the powers of a liquidator are broadly enumerated as follows:


(1) He can exercise the following powers only with court sanction:

(i) To institute or defend any suit, prosecution or other legal proceedings, civil or criminal in the name of the company.

(ii) To carry on the business of the company.

(iii) To sell the immovable property and actionable claims of the company by public auction or private contract with power to transfer the whole thereof to any person or body corporate.

(iv) To raise the required money as the security of the assets of the company.

(v) To appoint an advocate, attorney or pleader entitled to appear before the court to assist him in the performance of his duties.


(vi) To compromise call, debts and other pecuniary liabilities with contributories or debtors and take any security in discharge of any such claim and give a complete discharge in respect thereof.

(2) He can exercise the following powers without obtaining court sanction:

(i) To do all acts and to execute on behalf of the company all deeds, receipts and other documents and for the purpose to use, when necessary, the company’s seal.

(ii) To inspect the records and returns of the company on the files of the Registrar without payment of any dues.


(iii) To prove rank and claim in the insolvency of any contributory, for any balance against his estate.

(iv) To receive dividends in the insolvency, in respect of any balance against his estate, as a separate debt due from the insolvent and rateable with other creditors.

(v) To draw, accept, make and endorse any bill of exchange, hundi or promissory note on behalf of the company.

(vi) To take out in his official name, letters of administration to any deceased contributory, and to do any other act necessary for obtaining payment of any money due from a contributory or his estate which cannot be conveniently done in the name of the company.


(vii) To appoint an agent to do any business which the liquidator is unable to do himself.

Duties of Liquidator:

A liquidator is expected to perform his duties equitably and impartially according to the Companies Act.

Some of the important duties are enumerated below:

(i) When the liquidator receives the Statement of Affairs from the Directors, he must submit a preliminary report to the court.

(ii) On making of the winding up order, the liquidator has to take the properties under his control.

(iii) He must protect the assets of the company.

(iv) Within two months from the date of direction of the court, the liquidator must call a meeting of the creditors for determining the persons who are to be members of the Committees of Inspection.

(v) He must keep proper books and cause entries or minutes to be made of all proceedings at meetings.

(vi) He must, at least twice in each year, present to the court an account of his receipts and payments as liquidator.

(vii) Official liquidator shall pay all moneys received by him as liquidator of the company into the Public Accounts of India in Reserve Bank of India.

(viii) He should realise the assets and distribute the proceeds among the creditors and the surplus, if any, among the contributories according to their rights.

(ix) All the papers of the company must clearly indicate that the company is being wound up, i.e., by adding the words “In liquidation”.

Order of Payment:

The following amounts are realised by the liquidator:

(a) From the Debtors of the Company,

(b) From sale proceeds of the assets of the Company,

(c) The surplus amount from fully secured creditors and

(d) By making calls for the amount remaining unpaid on the shares.

Payments are made by liquidator in the following order:

1. Secured Creditors:

They need not prove their claims against the Company. They may realise their securities and satisfy the debts. They may put up their claim before the liquidator for deficiency, if any. If the secured creditors feel that their securities may not realise a sufficient amount, they may relinquish the securities held by them and prove their whole debt before the liquidator.

2. Legal Expenses:

All legal expenses are met out of the cash realised.

3. Remuneration of the Liquidator:

Generally the liquidator gets his remuneration in the form of commission. This is based on the assets realised. Cash and Bank balance is not included unless its inclusion is specifically mentioned. Surplus of secured creditors is mostly included in the amount of assets realised for calculation of liquidator’s commission.

When instruction for including full amount of security belongs to fully secured creditors is given, then full amount is included in the amount of total assets realised for calculation of commission. When the liquidator is given remuneration on the amount distributed to unsecured creditors also in addition to his remuneration on the amount of the assets, the following points may be noted in this connection:

(a) If sufficient amount is available to pay all the creditors then the amount of remuneration will be:

Amount of unsecured creditors x Percentage of Commission/100

(b) If the available amount is not sufficient to pay all the creditors then the amount of remuneration will be:

Amount of unsecured creditors x Percentage of Commission/100 + Percentage of Commission

4. Expenses and cost of winding up.

5. Payment to preferential creditors.

6. Payment to debenture holders and creditors who have floating charge on the assets of the Company.

7. Payment to unsecured or ordinary creditors.

8. Payment to members or contributories.

Regarding members, if any of them has paid in excess of the amount of call made on him, that will be returned to him first and then the preference shareholders are given and thereafter, if any, surplus is left, that will be distributed among the equity shareholders. Any surplus still left, will also go to the Equity shareholders unless the preference shares are the participating preference shares as per the terms of the issue.

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