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Winding Up of a Company is the Stage

Winding Up of a Company is the Stage

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categoriesBusiness/Law
Published by: routraykhushboo on Jan 03, 2012
Copyright:Attribution Non-commercial

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08/21/2013

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Winding up of a company is the stage, where by the company takes its last breath. It is aprocess by which business of the company is wound up, and the company ceases to existanymore. All the assets of the company are sold, and the proceedings collected are used todischarge the liabilities on a priority basis.
MODES OF WINDING UP:
T
here are three ways, in which a company may be wound up.
T
hey are:
A.
 
Winding up by the court
 
B
.
 
V
oluntary winding up:
 Members Voluntary winding up.Creditors Voluntary winding up.
C
.
 
Winding up subject to supervision of the court
.
 
WINDING UP
BY
THE
C
OURT:
A company may be wound up by the court in following situations. Here, the court means"High Court".If the company itself, has passed a special resolution in the general meeting to woundup its affairs. Special resolution means, resolution passed by three-fourth (3/4") of themembers present.If there is a default, in holding the statutory meeting or in delivering the statutoryreport to the Registrar.A company which is limited by shares, and a company limited by guarantee havingshare capital, is required to hold a " Statutory meeting" of its members, within sixmonths, and after one month, from the date of commencement of it's business. Astatutory report of the meeting so held shall also be forwarded to the registrar. [Sec165 (1) & (5)]If the company fails to commence its business within one year from the date of it'sincorporation, or suspends its business for a whole year.A company limited by shares, has to obtain a "certificate of commencement" of businessfrom the registrar. Unless it obtains such certificate, it cannot carry on its businessoperation.If the number of members, in a public company is reduced to less than seven, and incase of private company less than two.
T
he statutory requirement of minimum number of members in a public company isseven, and in case of private company, it is two (sec 12)If the company is unable to pay its debits; where the financial position of the company
 
is, such, that it has more liabilities than assets, and after disposing off the assets, it isstill unable to extinguish it's liabilities, it means that company is unable to pay it'sdebts.If the court, itself is of the opinion that the company should be wound up.
T
he court may form such an opinion, if it comes to the knowledge of court that, thecompany is mismanaged, or financially unsound, or carrying an illegal operations etc.
RELE
V
A
NT POINTS
A
.
WHO
C
A
N
A
PPL
Y
TO
C
OURT, FOR WINDING UP PETITION? (SE
C
439)
 Following persons can apply to the court, for petition for winding up
T
he company itself 
T
he creditorAny ContributoryRegistrarAny person authorised by central govt, in case of oppression or mismanagement (397)
B
.
WH
A
T ORDERS, THE
C
OURT M
A
Y
P
A
SS? (SE
C
443)
 
T
he court may pass any one of the following orders on hearing the winding up petition.Dismiss it, with or without costsMake any interim order, as it thinks fit, orPass an order for winding up of the company with or without costs.
C
onsequences of court passing an order for winding up:
 If the court is satisfied, that sufficient reasons exist in the petition for winding up, then itwill pass a winding up order. Once the winding up order is passed, following consequencesfollow:Court will send notice to an official liquidator, to take change of the company. He shallcarry out the process of winding up, ( sec. 444)
T
he winding up order, shall be applicable on all the creditors and contributories,whether they have filed the winding up petition or not.
T
he official liquidator is appointed by central Government ( sec. 448)
T
he company shall relevant particulars, relating to, assets, cash in hand, bank balance,liabilities, particulars of creditors etc, to the official liquidator. ( sec. 454)
T
he official liquidator shall within six months, from the date of winding up order, submita preliminary report to the court regarding1.Particulars of Capital
 
 
2.Cash and negotiable securities3.Liabilities4.Movable and immovable properties5.Unpaid calls, and6.An opinion, whether further inquiry is required or not ( 455)
T
he Central Govt. shall keep a cognizance over the functioning of official liquidator, andmay require him to answer any inquiry. (463)
C
.
 
ST
A
Y
ORDER 
 Where, the court has passed a winding up order, it may stay the proceedings of winding up, on an application filed by official liquidator, or creditor or any contributory. (466)
D
.
 
DISSOLUTION OF
C
OMP
A
N
Y
(481)
 Finally the court will order for dissolution of the company, when:1.the affairs of the company are completely wound up, or2.the official liquidator is unable to carry on the winding up procedure for want of funds.
E
.
 
A
PPE
A
L: 483
 An appeal from the decision of court will lie before that court, before whom, appeals liefrom any order or decision of the former court in cases within its ordinary jurisdiction.
V
OLUNT
A
Y
WINDING UP
A company may, voluntary wind up its affairs, if it is unable to carry on its business, or if itwas formed only for a limited purpose, or if it is unable to meet its financial obligation, andetc. A company may voluntary wind up itself, under any of the two modes:Members voluntarily winding up.Creditors voluntarily winding up.A company may voluntarily wind up itself, either by passing:An ordinary resolution, where the purpose for which the company was formed hascompleted, or the time limit for which the company was formed, has expired.
Or
 
B
y way of special resolution
B
oth types of resolution shall e passed in the general meeting of the company. (484)Once the resolution of voluntarily winding up is passed, and then the company may bewound up, either through:

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