Comment on the following: (i) The term 'Winding up' and 'Dissolution' can be used inter-changeably to denote cessation of existence of a legal entity.

Many times, the terms 'winding up' and 'dissolution' are used interchangeably. This is not correct. There are certain vital differences in these two terms which are given below: Winding up is the first stage of ending the legal existence of the entity. In this stage, the assets of the entity are realized, its liabilities are paid off and surplus, if any, is distributed amongst the contributories whereas dissolution is the final stage after completion of winding up process and by act of law, the legal existence of the entity comes to an end. The winding up process is handled by a liquidator/insolvency professional. The dissolution can happen only by way of an order passed by the adjudicating authority. Creditors can prove their claims during winding up but not on dissolution since the entity no longer exists. Winding up need not result in dissolution in all cases. A company which is in winding up can be taken over / amalgamated by any other entity / company which will result in the company coming out of winding up process and being handed over to the shareholders. This is not possible in case of dissolution.