Effects of liquidation on the liquidating corporation

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Compulsory winding up Under section 253 of the Companies Act (Cap.50), the company itself, creditors, contributories, liquidator, judicial manager or the Minister may present a winding up application to the High Court.d) Floating charges A floating charge created within 6 months of the commencement of the winding up shall be invalid, except to the amount of cash paid to the company at the time of or subsequently to the creation of the charge, together with the interest at 5% per annum.The floating charge shall remain invalid unless the secured creditor is able to prove that the company was solvent after the creation of the floating charge.The proceeds of realisation of assets under a floating charge will first be used to pay certain priority claims in accordance with section 328 of the Companies Act (Cap.50) before satisfying the claim of the lender secured by the floating charge.For example, sale of assets at full market value may also be validated if the transaction does not involve dissipation of the company's assets.A disposition or sale carried out in good faith in the ordinary course of business at a time when parties are unaware that a winding up application has been presented may be validated by the Court unless there were grounds for thinking that the transaction might involve an attempt to prefer the buyer.

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Even if the floating charge is invalid, the debt will remain as an unsecured debt.Upon the completion of the liquidation, the company goes into dissolution and it ceases to exist.The purposes of a liquidation are: Just distribution of assets When a company is being wound up, the company’s business ceases to operate and its assets and affairs are handed over to an independent liquidator whose powers, duties and functions are regulated by the Companies Act (Cap 50).Overview Liquidation is a process where the company’s assets are seized and realised, with the resulting proceeds used to pay off its debts and liabilities.Any surplus is then distributed among the contributories of the company according to their rights and interests, or otherwise dealt with as the constitution of the company directs.

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