KENYATTA UNIVERSITY

SCHOOL OF PURE AND APPLIED SCIENCES

DEPARTMENT OF BUSINESS ADMINISTRATION

UNIT CODE : BBA401

UNIT NAME : COMPANY LAW

LECTURER : DR. ELUID OBERE

STUDENT NAME : AUGUSTINE KUTANYI

REG. NO. : I73/0788/2017
WINDING UP BY TRIBUNAL

Section 270 of the Companies Act, 2013 provides that the provisions of Part I of Chapter XX of the
Companies Act, 2013 shall apply to the winding up of a company by the Tribunal under this Act.

Circumstances in Which Company May be Wound Up by Tribunal

Section 271 of the Companies Act, 2013 provides that a company may, on a petition under section 272,
be :

wound up by the Tribunal under following circumstances-

(a) if the company has, by special resolution, resolved that the company be wound up by the Tribunal;

(b) if the company has acted against the interests of the sovereignty and integrity of Kenya, the security
of the State, friendly relations with foreign States, public order, decency or morality;

(c) if on an application made by the Registrar or any other person authorised by the Central

Government by notification under this Act, the Tribunal is of the opinion that the affairs of the

company have been conducted in a fraudulent manner or the company was formed for fraudulent and
unlawful purpose or the persons concerned in the formation or management of its affairs have been
guilty of fraud, misfeasance or misconduct in connection therewith and that it is proper that the
company be wound up;

(d) if the company has made a default in filing with the Registrar its financial statements or annual
returns for immediately preceding five consecutive financial years; or

(e) if the Tribunal is of the opinion that it is just and equitable that the company should be wound up.".

Petition for Winding Up

Section 272(1) of the Companies Act, 2013 provides that subject to the provisions of this section, a
petition to the Tribunal for the winding up of a company shall be presented by—

(a) the company;

(b) any contributory or contributories;

(c) all or any of the persons specified in clauses (a) and (b);

(d) the Registrar;

(e) any person authorised by the Central Government in that behalf; or
(f) in a case falling under clause (b) of section 271, by the Central Government or a State Government.
A contributory shall be entitled to present a petition for the winding up of a company, notwithstanding
that he may be the holder of fully paid-up shares, or that the company may have no assets at all or may
have no surplus assets left for distribution among the shareholders after the satisfaction of its liabilities,
and shares in respect of which he is a contributory or some of them were either originally allotted to him
or have been held by him, and registered in his name, for at least six months during the eighteen
months immediately before the commencement of the winding up or have devolved on him through the
death of a former holder. [Section 272(2)]

The Registrar shall be entitled to present a petition for winding up under section 271, except on the
grounds specified in clause (a) or clause (e) of that sub-section: Provided that the Registrar shall obtain
the previous sanction of the Central Government to the presentation of a petition:

Provided further that the Central Government shall not accord its sanction unless the company has been
given a reasonable opportunity of making representations. [Section 272(3)]

A petition presented by the company for winding up before the Tribunal shall be admitted only if
accompanied by a statement of affairs in such form and in such manner as may be prescribed. [Section
272(4)]

A copy of the petition made under this section shall also be filed with the Registrar and the Registrar
shall, without prejudice to any other provisions, submit his views to the Tribunal within sixty days of
receipt of such petition. [Section 272(4)]

Powers of Tribunal

Section 273(1) of the Companies Act, 2013 provides the Tribunal may, on receipt of a petition for
winding up under section 272 pass any of the following orders, namely:—

(a) dismiss it, with or without costs;

(b) make any interim order as it thinks fit;

(c) appoint a provisional liquidator of the company till the making of a winding up order;

(d) make an order for the winding up of the company with or without costs; or

(e) any other order as it thinks fit:

Provided that an order under this sub-section shall be made within ninety days from the date of
presentation of the petition:
Provided further that before appointing a provisional liquidator under clause (c), the Tribunal shall give
notice to the company and afford a reasonable opportunity to it to make its representations, if any,
unless for special reasons to be recorded in writing, the Tribunal thinks fit to dispense with such notice:

Provided also that the Tribunal shall not refuse to make a winding up order on the ground only that the
assets of the company have been mortgaged for an amount equal to or in excess of those assets, or that
the company has no assets.

Section 273(2) of the Companies Act, 2013 provides where a petition is presented on the ground that it
is just and equitable that the company should be wound up, the Tribunal may refuse to make an order
of winding up, if it is of the opinion that some other remedy is available to the petitioners and that they
are acting unreasonably in seeking to have the company wound up instead of pursuing the other
remedy.

VOLUNTARY WINDING UP

Chapter V of the Insolvency and Bankruptcy Code of India 2016 deals with the Voluntary Liquidation of
Corporate Persons. Section 59

(1) A corporate person who intends to liquidate itself voluntarily and has not committed any default
may initiate voluntary liquidation proceedings under the provisions of this Chapter.

(2) The voluntary liquidation of a corporate person under sub-section (1) shall meet such conditions (3)
and procedural requirements as may be specified by the Board.

(3) Without prejudice to sub-section (2), voluntary liquidation proceedings of a corporate person
registered as a company shall meet the following conditions, namely:—

(a) a declaration from majority of the directors of the company verified by an affidavit stating that—

(i) they have made a full inquiry into the affairs of the company and they have formed an opinion that
either the company has no debt or that it will be able to pay its debts in full from the proceeds of assets
to be sold in the voluntary liquidation; and

(ii) the company is not being liquidated to defraud any person;

(b) the declaration under sub-clause (a) shall be accompanied with the following documents, namely:—

(i) audited financial statements and record of business operations of the company for the previous two
years or for the period since its incorporation, whichever is later;

(ii) a report of the valuation of the assets of the company, if any prepared by a registered valuer;

(c) within four weeks of a declaration under sub-clause (a), there shall be—
(i) a special resolution of the members of the company in a general meeting requiring the
company to be liquidated voluntarily and appointing an insolvency professional to act as the liquidator;
or

(ii) a resolution of the members of the company in a general meeting requiring the company to be
liquidated voluntarily as a result of expiry of the period of its duration, if any, fixed by its articles or on
the occurrence of any event in respect of which the articles provide that the company shall be dissolved,
as the case may be and appointing an insolvency professional to act as the liquidator: Provided that the
company owes any debt to any person, creditors representing two thirds in value of the debt of the
company shall approve the resolution passed under sub-clause (c) within seven days of such resolution.
 (4) The company shall notify the Registrar of Companies and the Board about the resolution under
subsection (3) to liquidate the company within seven days of such resolution or the subsequent approval
by the creditors, as the case may be.

(5) Subject to approval of the creditors under sub-section (3), the voluntary liquidation proceedings in
respect of a company shall be deemed to have commenced from the date of passing of the resolution
under sub-clause (c) of sub-section (3).

(6) The provisions of sections 35 to 53 of Chapter III and Chapter VII shall apply to voluntary liquidation
proceedings for corporate persons with such modifications as may be necessary.

(7) Where the affairs of the corporate person have been completely wound up, and its assets
completely liquidated, the liquidator shall make an application to the Adjudicating Authority for the
dissolution of such corporate person.

(8) The Adjudicating Authority shall on an application filed by the liquidator under sub-section (7), pass
an order that the corporate debtor shall be dissolved from the date of that order and the corporate
debtor shall be dissolved accordingly.

(9) A copy of an order under sub-section (8) shall within fourteen days from the date of such order, be
forwarded to the authority with which the corporate person is registered.

EFFECTS OF WINDING UP A COMPANY

(a) To Shareholders

-Contributors; a new statutory liability comes into existence.

-Every transaction of share during the liquidation done without the approval of the liquidator is

termed void.

(b) To Company Creditors

- The creditors cannot file a case against the company except with the consent of the court.

- If the Creditors already have decrees, they cannot proceed with the execution.

- They must explain their claims and justify their claims to the liquidator.

(C) Members

- The winding up order operates as notice terminating the employment contracts of all the

company's employees.
 - If you have lost your Job, you can file a claim in the liquidation if you are owed any salary, wages,
holiday pay or redundancy. Your claim may be considered preferential, which means you will be paid out
before the unsecured creditors if there are funds available.

(d) To Directors

- The Directors are required to complete a statement of Affairs which includes; a brief description of
the company's history, trading details, details of the course of company's failure, all company's assets,
liabilities and stakeholders information.

- With the appointment of the liquidator,all the powers of the directors tend to cease.

- The Directors may still owe for personal guarantees; bankruptcy of the company won't wipe out the
debts that were personally guaranteed.

- Only the powers to give notice of resolution and the power of appointment of a liquidator upon
winding up of the company are given to the members.

REFERENCES

Company Law - The institute of company secretary of India (2013)

Company Law, Ann R., Chris S.,(2015)