Creditors:

A company can never be declared insolvent, although it may have become insolvent in the sense that it is unable to pay its debts. Where a solvent company is being wound-up all the debts payable on a contingency and claims against the company, present or future, certain or contingent, ascertained or sounding only in damages, are admissible to proof against the company. A just estimate should be made of the possible value of such debts or claims as may be subject to any contingency or may sound only in damages or for some other reason may not bear a certain value (Section 528). As regards the rights of the creditors, company which is being wound-up for its inability to pay its debt, the same rules prevail as in the case of insolvency law in respect of debts provable, the valuation of annuities and future and contingent liabilities and the respective rights of secured and unsecured creditors (Section 529).

The secured creditor may rely on the security and ignore the liquidation altogether, or value his security and prove for the balance of his debt, or give-up his security and prove the whole amount. Unsecured creditors are paid in the order prescribed by Section 530. Preferential creditors are paid first; liability for dividends is satisfied only if claims of outsiders are fully met.