Liquidation is the process of winding up a company’s affairs, selling off assets to pay creditors, and distributing any remaining assets to shareholders. This process can be voluntary or court-ordered (compulsory liquidation).

Voluntary Liquidation: Shareholders decide to liquidate the company, usually due to insolvency or business closure. A special resolution is passed, and a liquidator is appointed to oversee the process. The liquidator sells assets, pays off debts, and distributes any surplus to shareholders. The company then files for dissolution with the Registrar of Companies (ROC).

Compulsory Liquidation: A court orders liquidation, often due to creditor petitions when the company cannot pay its debts. The court appoints an official liquidator to manage the process, similar to voluntary liquidation, but under judicial oversight.

In both cases, the liquidator ensures all legal procedures are followed, assets are fairly valued, and creditors are paid. Liquidation ultimately dissolves the company, ceasing its existence and freeing stakeholders from ongoing obligations.