Law of Company and Insolvency

Company: Meaning, Nature and incorporation of company, Insolvency: Meaning and procedure of insolvency of company, Investigation, Re- organization and liquidation of a company, Power and role of the liquidator, Nepalese law of insolvency and feature of insolvency Act, 2003.

Notes

Meaning and procedure of insolvency of company

Incapacity to pay debts upon the date when they become due in the ordinary course of business is known as insolvency. The condition, which individual property and assets are inadequate to discharge the person's debts. Insolvency is a condition of having more debts (liabilities) than total assets which might be available to pay a creditor, even if the assets were mortgaged or it is sold. It is a determination by a bankruptcy court that a person/ business cannot raise the funds to pay all of his debts. The court will then "discharge" some or all of the debts, leaving those creditors holding the bag and not obtaining what is owed them. The supposedly insolvent individual debtor, even though found to be bankrupt, is allowed certain exemptions, which permit him to retain a car, personal property, business equipment, and often a home as long as he continues to make payments on a loan secured by the property.

Reorganization and liquidation of a company

quidation is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations as and when they come due. The company’s operations are brought to an end, and its assets are divvied up among creditors and shareholders, according to the priority of their claims. Liquidation is the process of selling off all the assets (when a company is insolvent) , distributing any remaining funds to shareholders, settling its liabilities, and closing it down as a legal entity. The liquidation process is a possible outcome of loss, which a company enters when it does not have sufficient funds to pay its creditors (liabilities exceed assets). Liquidation can be voluntary or involuntary (compulsory). A petition to liquidate a company can be made to the applicable court by creditors who have not been paid by the company. If granted by the court, the business will involuntarily enter to failure.