Q.Discuss the procedure of voluntary liquidation by creditors.

Creditors' voluntary liquidation applies to an insolvent company: members resolve to wind up, a creditors' meeting is held, the creditors mainly decide the liquidator and committee of inspection, and the liquidator realises assets and pays off debts. Creditors' voluntary winding-up is resorted to when the company is not able to pay its debts (insolvent), so no declaration of solvency can be made. The procedure is: 1. The Board of Directors considers the position and, being unable to declare solvency, decides to wind up voluntarily. 2. A general meeting of members is called and a resolution for voluntary winding-up is passed; the members may propose a liquidator. 3. A meeting of creditors is held on the same day or the next day; a statement of the company's affairs (assets and liabilities) is placed before them. 4. Since the company is insolvent, the creditors have the dominant voice — they can nominate the liquidator (their choice prevails if it differs from the members') and appoint a committee of inspection to supervise. 5. On appointment, the directors' powers cease (except as allowed) and pass to the liquidator. 6. The liquidator realises the assets, pays the creditors in the legal order of priority, and …