TUTORIAL – LIQUIDATION

Group Members:
Rashnita Neha Kumar 20190191
Sereya Prasad 20190069
Priyanka Shivani Lata 20190052
Aksha Pradad 20190162

Review Questions

3a.)
 Carry on the business of the company so far as is necessary for beneficial disposal or
winding-up.
 Pay any class of creditors in full.
 Make arrangements with parties claiming to be creditors.
 Come to agreements regarding calls, liabilities and claims existing.

3b.) In the case of a voluntary liquidation powers are specified under s 506. They include all the
powers given under s 477 to court appointed liquidators. s 506 also confers some additional
powers in relation to performing roles that are performed by the courts in court appointed
liquidations (e.g. fixing a time when debts and claims must be proved).

4.) Statement of affairs shows the Summary of assets, liabilities and details of charges over
assets and secured liabilities.
Form 509 – this form is used by the holder of an existing name to consent to the use of a similar
name as the name of a filing entity or foreign filing entity for the purpose of submitting a filing
instrument to the secretary of state. Use of this form is permissive.

6.) Contributories – are defined as members or past members of a company who is liable to
give money towards the payment of a wound-up company's debts. A member of a limited
company shall be liable to contribute the unpaid number of shares on which he is a contributory,
or the amount he has guaranteed to pay in the event of winding-up. A past member is also liable
to contribute if he ceased to be a member within one year before the commencement of winding-
up and the present members fail to meet their liabilities. But a past member is not liable to
contribute if he has ceased to be member for the year or upwards before the commencement of
winding-up. It must be remembered that a past member is not liable after he ceases to be a
member. At the same time, a past member is not liable to pay provided the present members fail
to contribute the fullest extent

9.)
 Debentures secured by floating charge
 Liquidation expenses
 Costs of administrative prior to liquidation
 Workers compensation claim
 Long service leaves payable
 Amount payable for research into mining techniques
 PAYG income tax instalments
 Salary of an employee who is the spouse of a director, $3000
 Directors fees
 Telephone bill payable
 Audit fees payable for normal audit of company’s accounts
 Accounts payable
 Deferred tax liability
Question 21.2
$ $ $
Proceeds from sale of assets $671 650
Less: Payments of debts (in order of priority)
1. Liquidator’s expenses 3 000
2. Secured debts
First Mortgage 100 000
Second Mortgage 70 000 170 000
3. Circulating security interest:
Debentures 300 000
4. Liquidator's remuneration* 8 000
5. Wages:
Employees 4 000
Secretary 720
Managing Director 2 000
Sales Commission 500 7 220
6. Employees’ holiday pay 5 000 493 220
Amount available for unsecured creditors 178 430
7. Ordinary unsecured creditors:
Owed Percent Paid
Dividends
Unsecured notes 100 000 90.04 90 040
Trade accounts payable 80 000 90.04 72 032
Fringe benefits tax 2 000 90.04 1 801
PAYG tax instalment 780 90.04 702
GST 1 989 90.04 1 790
Directors fees 3 000 90.04 2 701
Managing director’s salary 400 90.04 360
Second Mortgage 10 000 90.04 9 004
$198 169 $178 430

$ 178430
Percentage dividend to trade accounts payable = =90.04 c ∈$
198169

*Note: Referring to the paragraph on ‘liquidation expenses’ on page 1304. In practice, liquidator’s
expenses are paid first (despite it ranks 2nd). If the question told us the proportion of liquidator’s
remuneration pertaining to the realisation of secured debts, we could have listed that proportion
first as well.

Question 21.3

No. of Paid to Notional call Notional Actual Deficiency

shares Refund Refund(call) share
$0.20

(no. of (no. of (no. of (notional (no. of

FORMULA shares*amount shares*amount shares*notional refund – shares -
paid) unpaid) cash per share notional notional
call) refund)
Ordinary 110000 110000 - 22000 22000 88000
‘A’ 80000 48000 32000 16000 (16000) 64000
Ordinary
‘B’ 10000 5000 5000 2000 (3000) 8000
Ordinary
200000 163000 37000 40000 3000 160000
Cash 3000 3000
Available
Deficiency 160000
Total $40000
notional
cash

Total notional cash per share = 40000/200000

=$0.20 per share

Cash Available = Cash balance – Preference share

= 53000 - 50000

= $3000

Liquidator’s Statement of Receipts and Payments

Balance after paying liabilities 53000 Distribution to :

Call on ‘A’ Ordinary 16000 Preference shareholders 50000
 Call on ‘B’ Ordinary 3000 Ordinary shareholders 22000
$72000 72000

Shareholders Distribution Account

Cash: Share Capital

Preference 50000 Preference 50000
Ordinary 22000 Ordinary 110000
‘A’ Ordinary 64000
Deficiency on Liquidation ‘B ’Ordinary 8000
Ordinary 88000
‘A’ Ordinary 64000
‘B’ Ordinary 8000

$232000 $232000

Question 21.7
A.

Liquidation
Carrying amount of assets: $ Proceeds from Sale of Assets: $
Accounts receivable 23250 Accounts Receivable 8200
Inventories 24750 Inventories 5250
Plant & Equipment 48100 Plant & Equipment 15000
Goodwill 19750 Gain on disposal of secured asset 15000
(Land & Building)
Liquidation expenses 1500
Arrears of Preference dividends 2100
Forfeited Shares Reserve 500
Retained earnings 6500 Share of Deficiency:
Preference 13782
Ordinary 68218
125950 125950

Shareholders’ Distribution
Share of Deficiency: Share Capital:
Preference 13782 Preference 15000
 Ordinary 68218 Ordinary 74250
Return of Capital to:
Preference 1218
Ordinary 6032
89250 89250

*after forfeiture of 500 ordinary shares.

Share of Cash
( after forfeiture of 500 ordinary shares for not paying calls in arrears.)
Number Paid to Notional Notional Actual Deficiency
of Shares Call Refund Refund Share
(Call)
Preference 10000 15000 5000 6218 1218 13782
Ordinary 49500 74250 24750 30782 6032 68218
59500 89250 29750 37000 7250 82000
Cash available (7250) 7250
Deficiency 82000 -
Total Notional Cash 37000

*Ordinary
50000 – 500 = 49500
*Cash available = 50350 – 43100 = 7250
*Total notional cash per share = 37000/59500 = 62.185c per share

B.

Liquidators’ Statement of Receipts and Payments

Receipts $ Payments $
Balance of cash 2150 Liquidation Expense 1500
Proceeds on Sale of Assets: Debentures & Interest 20400
Accounts Receivable 8200 Salaries 1600
Inventories 5250 Accounts Payable 14650
Plant & Equipment 15000 PAYG tax instalment 2850
Arrears of preference dividend 2100
Net amount received from 43100
secured creditors 19500 Return of Capital
Calls in arrears (ordinary) 250 Preference 1218
Ordinary 6032
50350 50350