Members’ Voluntary Winding Up
The members of the company may pass a resolution that the company be wound up and also appoint a liquidator.This mode of winding up is best adopted where the company is able to pay its debts in fullwithin 12 months after the commencement of winding up.Winding up commences at the time of passing of the resolution. When it is proposed to wind up the companyvoluntarily, the directors of the company is required under Section 293 CA to make a statutorydeclaration that they have formed the opinion that the company will be able to pay its debts infull within 12 months after the commencement of winding up.
Creditors’ Voluntary Winding Up
-If the company is not able to meet its liabilities, the company can convene a meeting of its creditors toconsider its proposal for a voluntary winding up of the company. If a resolution is passed in favour of thewinding up, the company will appoint a liquidator, subject to any preference the creditors may have as tochoice of liquidators.
Compulsory Winding Up
-Under Section 253 CA, the company itself, creditors, contributories, liquidator, judicial manager, or theMinister may present a petition to the High Court for the winding up of the company. The grounds tosupport a petition for compulsory winding up are found in Section 254. Compulsory Winding Upcommences at the date of presentation of the petition S255.2Differences
• The difference between a voluntary liquidation and a compulsory liquidation lies in the manner inwhich the winding up is initiated.
• To initiate a voluntary liquidation, a resolution of the members must be passed.
On the other hand, a compulsory liquidation is initiated by a petition to the court by a partywith
to do so.Who can apply for winding up:Section 253(1) CA: Provides for who may petition for winding up of a company:
s 253 - Eligibility to be an applicant
company; creditor; contributory
NOT officers of the company – ie director cannot wind up comp unless shr or creditor.- s 254 - Grounds for WU
most common – comp unable to pay debts:
Application for winding up.253.
—(1) A company, whether or not it is being wound up voluntarily, may be wound up under an order of theCourt on the application — (a) of the company;(b) of any creditor, including a contingent or prospective creditor, of the company;(c) of a contributory or any person who is the personal representative of a deceased contributory or the OfficialAssignee of the estate of a bankrupt contributory;(d) of the liquidator;(e) of the Minister pursuant to section 241 or on the ground specified in section 254 (1) (
) or (
);(f) of the judicial manager appointed pursuant to Part VIIIA;(g) in the case of a company which is carrying on or has carried on banking business, of the Minister chargedwith the responsibility for finance; or (h) of the Minister on the ground specified in section 254 (1) (
),or of any two or more of those parties.(2) Notwithstanding anything in subsection (1) — (a) a person referred to in subsection (1) (
) may not make a winding up application on any of the groundsspecified in section 254 (1) (
) or (
), unless — (i) the company has no member; or (ii) the shares in respect of which the contributory was a contributory or some of them were originally allotted tothe contributory, or have been held by him and registered in his name for at least 6 months during the 18 months