Let's start from basics.
Let's say a company has financial problems. Their customers are not, or are slow in, paying them. Their creditors, including their bankers, are screaming for payment. Every day bang table and threatening legal action. Some even start legal action. Management just spend their time trying to handle the situation and got no time to deal with the real business. The management get more and more stress and have sleepless nights. Everyday they go to work feeling more and more tired, being less and less able to handle the daily fire fighting. Then, worse of all, they can't pay their staff on time and staff start switching off....
When their backs are up against the wall, one possible solution is to just apply to Court for winding up. If Court grants it (frankly, there is a 90% chance it will do so), creditors can no longer bang table etc and all law suits are automatically frozen. Liquidators are appointed. Their job is to sell the company's assets at the highest price and once most of the money is in, they will start to distribute the money. Liquidators costs and employees salaries get paid first, next is secured creditrs, then unsecured creditors and then shareholders (in proportion to the shares each shareholder holds). Shareholders may end up with nothing. In other words, winding up is the death of the company and the liquidators are there just to distribute the assets of the company. This process could take 6 months to 2 years to complete and liquidators and their lawyers could get paid a lot out of the assets of the company (Ouch!).
Judicial management or JM is quite different. The JM is trying to revive the company. On a JM order, same effect. All the creditors have to stop chasing the company for payment and lawsuits are frozen. The JM will look at ways to revive the company such as getting the management to ignore creditors and focus on the business, selling non core business, cutting costs including letting go employees, getting new funding, getting strong companies to do JVs with the company, or even find a target to do an RTO, etc, etc. Sometimes, even though all these moves are tried, the company still cannot be saved. then the company goes into liquidation as per the above para and all is dead. Sometimes the company survive but in a different form; new funding if found will come in at a cheap price, diluting present shareholders. This JM process could take years and of course, it is possible that the JM and their lawyers will be paid a lot of fees.
So either process is not a happy occasion for shareholders. What to do? Bo bian.
There is a knock on effect. Once either process start, creditors of the company will not paid for months or maybe even years. These creditors could collapse becuase they cannot collect from the company. And of course, these collapsed creditors cannot pay people such as our banks. A large collapse like Swiber could have a ripple effect through our economy. We don't know whether small or big ripples.
Please DYOR. The above is what I remember from decades ago. Some of the details may be inaccurate but the big picture is correct.
