The process whereby the life of the company is brought to its end, and its property is administered for

the benefit of its creditors and its members (shareholders), is known as the winding-up of the company. An administrator, referred to as the liquidator, is appointed, who takes over the control of the company, collects its assets, pays the debts, and finally, distributes ant surplus, if any, amongst its members (shareholders) according to their rights, subject to the cost of his doing so. The statutory process by which this is achieved is referred to as the liquidation.

There is a distinction between the winding-up of the company and the insolvency of the individual, in the sense that a company cannot be declared insolvent under the law of insolvency. Further, even a solvent company may be woundup, which is not the case with the individuals.

The winding-up by the Court is generally referred to as the Compulsory Windingup.

The Court will issue an order for the winding-up of a company on an application by any of the following: (i)The company itself by passing a special resolution, or (ii)Any creditor or creditors, including any contingent or prospective creditor or creditors, or (iii)A contributory or contributories, or (iv)Any combination of creditors, company or contributories, acting jointly or separately, or (v)The Registrar of Companies, or (vi)Any person authorised y the Central Government as per Section 243, or (vii)The Official Liquidator(Section 440).

The High Court, having the jurisdiction in regard to the place at which the registered office of the company concerned is situated, has the jurisdiction to wind up the company, except to the extent to which the jurisdiction has been conferred on any District Court or District Courts, subordinate to the High Court. However, the application for the winding-up of a company, with a paid up share capital of Rs 5 lakh or more, has to be filed in the High Court. The registered office of the company, for this purpose, means the place, which has the longest been the registered office of the company concerned during the period of six months immediately preceding the filing up of the petition for the winding-up.

The Court may wind-up a company in the following cases: (a) (b) (c) (d) (e) (f) Special Resolution Default in holding Statutory Meeting Failure to Commence Business Reduction in Membership Inability to Pay Debts Just and Equitable

The winding up of the company by the Court shall be deemed to have commenced at the time of the filing of the petition for the winding-up.

Two types of voluntary winding-up:

(i)The members (shareholders) voluntary winding-up, and (ii)The creditors voluntary winding-up.

Manners of Voluntarily Winding-up: (a) If the company, in its AGM, passes an ordinary resolution for the voluntary winding-up, where the period fixed by the Articles of Association for the duration of the company has expired, or the event has occurred on which under the Articles of Association the company is to be dissolved. (b) In the cases where the company resolves, by special resolution, that it shall be wound up voluntarily. In the cases where the company has passed a resolution for voluntary winding up, it must, within 14 days of the passing of the resolution, give notice of the resolution by advertisement in the Official Gazette as also in some newspaper circulating in the district where the registered office of the company is situated

Voluntary Winding-up under Supervision of the Court At any time, after a company has passed a resolution for a voluntary winding up of the company, the Court may pass an order to the effect that that the voluntary winding-up should continue subject to the supervision of the Court. An application for such supervisions order by the Court may be made either by a creditor, a contributory, the company or the liquidator.

Such an order is passed by the Court under the following circumstances: (a)The resolution of the winding up was got passed (obtained) by fraud, or (b)The riles regarding the winding up order is not being observed, or (c)The liquidator is prejudicial or is negligent in collecting the assets.

In such a case, the Court gets the same powers as it has in the case of compulsory winding-up of the company under the order of the Court. The Court may also appoint an additional liquidator or liquidators. The Court may as well remove any liquidator and fill any vacancy caused by the removal or by death or by resignation of the liquidator. Further, the Court shall have as wide powers as it has in the case of a compulsory winding-up.

Moreover, the Court may stay suits or legal proceedings. It can make or enforce calls and all other orders necessary for a beneficial winding-up of the company [Section 526 (2)]. The Court may pass an order for compulsory winding-up, superseding the order of winding-up under its (Courts) supervision. Thereafter, the Court may appoint a person who is the liquidator, either provisionally or permanently, to be the liquidator in the winding-up by the Court in addition to, and subject to the control of, the Official Liquidator.

Dissolution of a Company In the case of the winding-up of a company under the supervision of the Court, the company is deemed to be from the date an order is issued by the Court to that effect. The Court will issue such an order when the affairs of the company have been completely wound-up, and the liquidator has made an application to the Court requesting it to pass an order for the dissolution of the company.

Dissolution of a Company Where a company has been dissolved, in accordance with the due process of law (except in the cases of defunct companies), on the expiry of five years from the date of such dissolution of the company, the name of the company should be struck off from the register of the Registrar of Companies, after noting against its name that it has been dissolved.

Liquidators The commencement of the legal process of the winding-up of a company does not put an end to the existence of the company. Its assets are to be realised and distributed among the debenture holders, creditors and shareholders, in that order, and so on. But first of all, the entire dues of the Central and the State Governments have to be paid in full.

Liquidators For this purpose some one has to act as the agent of the company. Such agent is called the liquidator. For the purposes of filing the Income Tax Return for the income earned during the process of the winding-up, it has been held that the liquidator will be regarded as the principal officer of the company.

A company is said to be dissolved when it ceases to exist as an entity for all practical purposes. But it is not the extinction of the company. After dissolution, the company is kept in the state of suspended animation for a period of two years. The dissolution of the company may be declared by the Court within a period of two years from the date of the dissolution.

The dissolution of a company may be brought about in any one of the following three ways: (a) In the case of a Defunct Company, the dissolution of a company may be brought about by removal of its name from the register of the Registrar of Companies. (b) In pursuance of Amalgamation or Reconstruction of a company, by the order of the Court without winding up. (c) In pursuance of the winding -up of the company.

A Defunct Company is a company which has never commenced its business or which is not carrying on its business. (a) In the cases where the Registrar of Companies has reasonable ground (cause) to believe that the company is not carrying on is business, or is not in operation, he will send a letter to the company, by post, inquiring about whether the company is carrying on is business, or is in operation.

(b) If the Registrar of Companies does not receive a reply to his aforementioned letter from the company within one month of his sending such letter to the company, he shall again, within a period of 14 days after the expiry of the aforementioned period of one month, send a letter to the company, this time by registered post, referring to the first letter, and stating therein that no answer to the first letter has been received and that, if an answer to the second letter is not received within one month from the date of the second letter, a notice will be published in the Official Gazette, with a view to striking off the name of the company concerned from his register.

(c) If the Registrar of Companies either receives an answer to his letter from the company concerned, to the effect that it is not carrying on its business or is not in operation, or does not, within one month after sending the aforementioned second letter, receives any answer from the company, he may publish in the Official Gazette, and send a notice to the company by registered post that, after the expiry of three months from the date of such notice, the name of the company will be struck from the register, unless the cause is shown to the contrary, and the company will be dissolved.

However, the dissolution of the company in the aforementioned manner will not affect the following: (i)The liabilities, if any, of every director, manager or other officer who was exercising any power of management and every member of the company. (ii)The power of the Court to wind-up a company.

If a company, or any member or any creditor of the company feels aggrieved by the removal of the name of the company from the register of the Registrar of Companies the Court may, on an application by the aggrieved party, any tie within 20 years from the date of the publication in the Official Gazette of the notice of striking the name of the company, order that the name of the company should be restored in the register of the Registrar of Companies.

The power of the Court to order for the restoration of the name of the company is discretionary, and will be given when the Court is satisfied of the following: (i) That, after restoration of the name of the company, the company will be in a position to carry on its business, or (ii) That, at the time off striking the name of the company from the register of the Registrar of Companies, the company was carrying on its business or was in operation, or (iii) That, it is just and equitable to that the name of the company should be restored.

The Court may, either by the order sanctioning the compromise or arrangement, or by a subsequent order, make provision for the dissolution, without winding up, of the company, whose undertaking, property or liabilities, either wholly or in part, under the scheme of amalgamation or reconstruction, is transferred to another company.

The corporate existence of the company continues throughout the winding-up process till it is dissolved. (a) In the case of Compulsory Winding-up (Section 481) The Court may pass an order dissolving a company in the following circumstances: (i) If the affairs of the company have been completely wound up; that is to say that the assets have been collected and the liabilities have been paid, as far as practicable , or (ii) The liquidator cannot proceed with the process of completely winding-up for want of funds and assets or for any other reasons whatever, or (iii) Under the circumstances of the case, it is just and reasonable that an order of dissolution of the company should be passed. After the making of the order of dissolution, the company shall be dissolved from the date of the order.

(b) In the case of the Members Voluntary Windingup (Section 497) As soon as the Official Liquidator, after scrutinising the books, accounts and papers of the company, makes a report to the Court that the affairs of the company have not been conducted in a manner prejudicial to the interests of members or to the public interest, then from the date of the submission of the report to the Court, the company shall be deemed to be dissolved. But then, where the Official Liquidator reports that that the affairs have not been so conducted, as aforementioned, the Court will direct him to conduct further investigation and submit his second report to the Court, and the Court may order that the company shall stand dissolved from a date specified in that order of the Court.

(c) In the case of the Creditors Voluntary Windingup (Section 509) The legal provisions in this case also are the same as in the case of the members voluntary windingup. However, the Court can, within two years, declare the dissolution void.

When a company has been dissolved in accordance with the due process of law, except where such dissolution has been made under Section 560, on expiry of a period of five years from the date of the dissolution of the company, the name of the company should be struck off from the register of the Registrar of Companies, after noting against its name that it has been dissolved. That is, in the case of the defunct companies the dissolution and extinction of the company takes place at the same time; but in the other cases, the extinction takes place after five years