Fundamentals of Company law 33S

A company is a creature of law it continues its business

through the process of law and comes to an end maintaining some
process of law. The company being a legal existence cap-i't die a
natural death and winding up is the process to put an end of the life
ofacompany.

Generally, the winding up or liqtlidation of a company means the

cessation of the company's legal existence and taking its
management. in the hands of the directors. When a company is
wound up its business stops, the assets are collec'ted and distributed
among the creditors and members in the manner prescribed in this
Act and in the articles of the company. About winding up pro/
Cower says, "winding up of a company is the process whereby its
life is ended and its property is administered for the benefits of its
creditors and members. An administrator, called a liquidator, is
appointed and he takes control of the company, collects its assets,
pays its debts and finally distributes any surplus among the members
in accordance with their richts478."

172 Winding uD and dissolution.

Sometimes confusion may be created that winding up and
dissolution are same but it is not true. Winding up precedes
disso|ution479. A company is said to be dissolved when its legal
cndty is totally ceased. But on the winding up the legal entity of a
crmipany still exists. Winding up is merely a forinal step to dissolve
de company and between winding up and dissolution the corporate
tndty of a company exists and so, it is liable to be sued in a court of
he.
ut3 Windinf! uD and insotvencv.
A notice among the general people is found that when a
aiiiiiiily is insolvent, it is wound up. And this .point needs to be
ut clear and ve must keep in mind that there is difference

ThrepRINcmLEOFMODERNCoMPANyLAw,(3rdEDT),ig69.
-RACIIAWAT J in Pierce leslie and co vs Wapshare,I 1969] 2 SCA 378.S
336 Winding up

between insolvency and winding up. A com'pany may be wound up

on different grounds like:
(a) default in holding statutory meeting;
(b) failure to commence business with the time prescribed
by law, and even when a company is fully solvent.
Thing should be noted that winding up is merely a
process t dissolve the company whereby the
management of its is just taken out of the hands of its
directors. In this sense, when a company is ordered to
be wound up its assets belong to itself and its
-administration is carried on through the medium of

liquidator. Surprisingly, if a company is wound up due

to insolvency, all the provisions of law relating to
insoi'vency do not apply.

i.1± )des of winding uD: [S.234]

The companies Act, 1994 provides three ways of winding up
of a company which are:
(i) compulsory winding tip under order of the court.
(ii) Voluntary winding up.
(iii) Winding up subject to the supervision of the court.
A voluntary winding up may be either a inembers voluntary winding
up48° or creditors voluntary winding up48`.

ding up by the court: [S. 241]

3aning: When a company is wound up:
y the special resolution of the shareholders; or
(b) fails to hold the statutory meeting or file the statutory
report; or
(c) fails to commence business within due time prescribed by
law; or
(d) has less number of members than its requirement as

te, Far;:¥£S&nbayb,I:Tj ;:y ;ts debts; or

(I) is wound up on just and equitable ground then it is called
compulsory winding up by court.

480sec.286.
48'sections-297-305.
 Fundamentals of company law 337

In the case of winding up by the order of the court, all activities are
conducted under the supervision of the court. For such supervision,
.government offlcial liquidator is appointed and the directors loose
dej#Ters.
E7Petition for winding up: Sec. 245 of our Companies Act
provides for persons who are eligible to file petition for
Provl'
compulsory winding up. This section says that an application to
the court for the winding up of a company shall be made by
presenting a petition. This section further says that the petition
may.be made .by the company or by any creditor or creditors,
including any contingent or prospective creditors, contributor or
contributors, or by all or any of those parties, together or
separately or by the Registrar. The following persons, as per S.
245, can make a petition to the court for winding up a company:

(i) Petition by company:

The company can file a petition for winding up but special
resolution to this effect must be passed482. Here another thing to be
kept in mind that the petition must be presented by the company
itself. In Rc p¢/I.a/a B¢»qfpaf7. Co483, a petition for the winding up
was presented by the managing director of the company but the court
rejected the petition. The court, in this case observed that the petition
must be made by the company sanctioning by a re'solution passed at
the general meeting. Thus, a person who was not authorised
board of directors can't file a petition for the winding up
company484.

(ii) Creditor's petition:

A compulsory winding up is usually initiated by a creditor's
petition. The term creditor includes:
(a) contingent; or
(b) prospective creditor.s.

Thental Navigation co vs Bhanaram.Agarwala,AIR 1922,Cal 365.

483 iih i^-^ h -.`~
AIR 1953 Pepsu 195.
BOC India Ltd vs Zinc Products and co (pvt) Ltd,[1969]86 Comp Cas
358 Pat.

22
 340 Winding up
4
financial condition of the company from its balance
sheet or from the report so published; or
(e) if the court is of the opinion that it is just and equitable
that the company should be wound up.

Jrff{ iunds of compulsory winding up by court: [S. 241]

S. 241 of our companies Act lays down the grounds of
compulsory winding up of a company. This section provides that a
company may be wound up by the court:
(i ) ±£±!±£P££ia_I+?_S_9+u~tj on it_ _res`~olve§ ,t.h_a.t it _ be_ wo_und
EL± Or\
(i i) jfj±ifefa±±!±±±nHfl±i±8±±£±i±±9B±=rj§p9±9±j±±9!£!p8
£he±t_aluJ.Qrymee±ingLol
(iii) if the coin fails to
ear from Its
iss. ~sei-

bHrfe..fe±..a_erbQ,I.sunyseE±fofr
(iv) if±bi;n±±=m=ber of member is reduced tha~pjhe
s,tatutory rgg uirgmpenfi Q1_
(v) jfrfro#Hab,!£Ssepexj±sq,±£h±s±£r
tvi> iREtife9+!±!4ib£_vyhQ+±p#gc.up
uen_J±±S£±n±±q±±!£ak!±_ffg±±n4sL [Rch i.in wd#i.#
Ahmedrvs-Bengal water ways Ltd [1979] 31 DLR
28.

jfy' Special resolution:- If the company itself passes an special

resolution to wind up the company, and.applies to the court to this
effect,
tE>~ -~ .
the court
*
may grant its application arid
., _Liz -i_i_._=_...g.a.p~g;:=;=-.E====--=---`_-_==:I-a-;:`{app-''` pass an order to wind
±+i,Z'3e-_ -=r:..==:-? = .} zir:=:-+.i:,-3:=r`'--.-- *-rr..: --,- I.,I.tin,a ..ezats^ ....- ~_ _ .-.-... ia€

up the company. ut a company is not i to pass an order of

Windingu.Prat+=_P..e,r_e±y.rfb££9rg.S£.`_£h±.SL±+grft_q!did_eEshaLYe`_appli.e_drfuQ£°_rar±±js

Purp9Se.

i:::atLi:'t:tu:Sht*:n€i=;;:;i::==:#£:::::g:jfn:::hce°junTeraens:::tphueb]::uortr
company as a whole, the court shall not order for winding up.

#d::::]ut]tjnjnfi[i::Pjs¥gtusttoa;utr::%rimteoettfhneg:Eel:i:trca:mo¥a:gfa:ftk::
holding statutory meeting, the court may order to wind up this
company.
 Fundamentals of company law 34J

¥:::g?ge#5;9;Pi#T:a¥hbvee6:?::oi:aem%:;:ff:n::~:S::§e:tsi~:i:o[:hbe:fi::::rF::ae:
be delivered or statutory meeting shall be held. Another thing to be
kyt in mind that if the petition is brought by any other person e,gb a
editor, it._ must be filed before the ex iration of fourteen da s after
a_i-L__
e_fagTt daF6FTwlffl meetin ht to have been held.
fiiiE Ince' a private company is not required i=Olgfd¥ffigfifa
_ _I____ _ --__ -I+,,1-+,t-I,|J, +A

xp provisio-n
^0?
shall have. no`application in case of a private
company493

JfiIrcompany not carrying on business:-If the company does not

commence its business within a year from its incorporation or has
suspended business for a whole year, the court may order to wind up
the company494. But this is not an absolute rule, if the court is
satisfied that there was any reasonable ground for not carrying on
company's business with the stiputoted tim?, the court may refuse to
make such winding up order. Generally, the court will order for
windingr_.up where trfe intention of the company not to carry on
bL±±s±Efs±±±i2!:9±±e=±±r¥±iin=±±±±=imiaEiEi=rfu
neverhavesufficie-nTrTsources EEEREEi
Of Mur l if ir±gtil Steamship Egr¥ ~ap--t6-6+m±pany for the
purpose of carrying on business, had a steamer and two flats ready.
But the flats were subsequently acquired by the government during
the First World War for which it was not possible for the company to
commence its business. Besides, the company failed to replace them
immediately because of economic. crisis. After one year, a petition
fu wind up the company was filed and th6 court found reasonable
ground not to cany on the business and that's why the petition was
refused.

Reduction in membership:- If the number of members is

rdned, in case of public company, below seven, and in case of

-S.R. Subramanium vs Dirvers' and Conductirs' Bus Service,[1978] 48

camp Gas 674 mad.
J" see.241 .
Re Metropolitan Rly Warhousing co.[1867] 36_LJ Ch 827.
Jms Re Londo-n and Corinty Coal co.rl 867]
I _LR
_ 3
I _Eq 355.
__ _-

ur AIR ( I 920) CAL 722.

 342 Winding up

private company, below two, the company may be wound upk

order of the court. [S. 241 (d)]
/

# Inability to pay debts:-If a company is unable to pay debts, it

may be ordered to be wound up498. "Unable. to pay debts" indicates
that the company is cominercially insolvent. J# Rc E#ropc¢# £iJc
Affurw#ce Soci.erty'` . it was held that a company is said to be
commercially insolvent when "its assets are such and existing
liabilities are such as tb make it reasonably certain ------ as to make
the court feel satisfied ------- that the existing and probable assets
would be insufficient to meet the existing liabilities."
However, sec. 242 (1) our act provides that a company shall be
deemed to be unable to pay its debs:
(a) if the company is indebted for a sum exceeding five
thousand-` taka and the `cFeditoF has served a demand
notice to the company to pay the sum but t-h6 company
has, for three weeks thereafter, neglected to pay the
suin or to secure or compound for it to the reasonable
satis l`action of the creditor5°°; or
(`b) if any decree 6r order of any court_ in favour of a
creditor is not executed either wholly or in part5°]; or
(c) if it is proved to the satisfaction of the court that the
company is unable to pay its debts.

:j]rJust and equitable grounds:-The last clause ofs. 241 provides

that if the court is of opinion that it is just and equitable that the
company should be wound up then the company may be wound up
by the order of the court5°2. But this should be the last resort to seek
remedy5°3. Actually, this clause gives the cou" a wide discretionary
power and in exercising the power the court may refuse to make an
order of winding up if any other efficacious remedy is available5°4.

498 sec 24] (e)

4`" I I 869] LR 9 Eq 122.
5°°Re Globe , etc,Steel co.[] 875] LR 20 Eq 337.
5`" Re Douglas Griggs Engineering Ltd.[1963]Ch.19.
502 see.24 I (Vi)

Gadadhar Dixit vs Utkal Flour Mills (pvt) Ltd,( 1989)66 comp cas 188
Ori.
Lokenath Gupta vs Credits (pvt) Ltd,I 1968] 38 comp cas 599.
 Fundamentals of company law 347

(ii) No suit in winding..up Order:-When a winding up order has

been made or a provisional liquidator has been appointed, no suit
shall be proceeded or commenced against the company except by
leave of the court. [S. 250]

(iii) Official liquidator to be appointed:- When a winding up order

is made, to conduct the proceeding in winding up a company any
person may be appointed by the court as an official liquidator. [S.
256]

rrv} C.stody of company's property:- On the order of winding up

Of llie company, the official liquidator shall into his custody or under
IIis control all the property effects and actionable claims to which the
eotnpany is prima facie entitled. [S.260]

tr} Terminati6n of the director's powers:- When the company is

•rdned to be wound up `the directors' powers shall be terminated
all the official liquidator(s) shall have all powers in respect of
mchicting the wind up proceeding.

qlD Property deemed to be in the custody of the court:- Where a

ng up order is made-all the property and effects of the company
I be deemed to be in the custody of the court. [S. 260 (2)]

Security Of the secured creditors:- A secured creditor is

I to realise his security without the leave of the winding up
The reason behind it is that a secured creditor is deemed to
outside winding up. [Re Maksudpur Refrigeration Industries
47 Comp. -Gas. 67.

windin
g: A voluntary winding up is different from compulsory
up. This mode of winding up is more common and
us in the present days. When the members and the
settle the affairs of the business in their own accord without
illl-mrmtion of the court it is called voluntary winding up. This
of winding up has more advantages because there are fewer
to maintain in the course of ivinding up. However,
 Fundamentals of company law 349

Cinmencement of voluntary winding up:- A voluntary winding up

rfull be deemed to commence at the time when the resolution for
sueh a winding up is passed. [Sec. 286 (2)]

Subject to declaration of financial solvency of the company,

tile `roluntary winding up may be of two types:
(i) Members voluntary winding up; and
(ii) Creditors' voluntary winding up.

17.9 Me_mbers voluntary windin_g]±±2±

n A Meaning: A voluntary winding up is said to be members

E¥ utuntary winding up when a declaration of solvency is made by the

dEeetors in accordance with the provisions of this Act. So, -in a
whmtary winding up if there is a declaration of financial solveney to
E effect that the company has ability to pay its debts then it will be
nddered as voluntary winding up. To determine whether a
ulrmary winding up is dher members `or creditors' palmers
-nent may be mentioned here.
H says, "the test is not whether the company is solvent or not but
r the declaration of solvency has been made before the
I meeting passed the resolution for winding up. If this has
over looked, such a declaration can't be made after that general
ng ln that case the voluntary winding up would .technically be
or's voluntary winding up though the company may be
=iallv solvent."

Procedure 'of members' voluntary winding up: In case of

' voluntary winding up, the following procedure is

4¥4ukNE]aration of financial solvency:- Where it is Proposed to

up a company voluntarily, the directors of the company or, in

-of a.company having more than two directors, the majority
dintors shall at a meeting of the directors held before the date
['..'= rl I-

the notice of the meeting at which the resolution for the

up the company is to be proposed are sen`t out. make a
verified by an affidavit to the effect that they ha-vtri~a±dF
HLJlry ln 9f the comp_a_ny andLt.hey~hELv£.fgmrd
 350 Winding up

a.nrQpjn.i.on=thatjbefo_in_pany_.ELjlib_Q~.a`bLeLtQ]2ay_
---~ p - --~-I-`~~.<--~.its debts
-`~-ay in full
.---- a€-a.--QLr-q_i-+_

¥it~Lin~a_m±ifed<q`.9ifhrs±±!s+£rE_~~@€rapL±~E.th~£9„ng¥he±c_e±£±±;oJ±h±
1, I- I ---, I \ -
winding±p. [Sec. 290 ( I )]
==--

(ii) Submission. of this declaration to the registrar:- Where the

directors make a declaration Of financial solvency of the company,

:fiogg£,:jr%±st:FP±nnG=e:;\±:_readrteon:=eo±Et:aje±t.:_ao±=:±==jn±
p!±H29ge=Lge=±=f±e8i§!i9£_iofl_±!£j±ninrfe±p!g§±=i±£g±i=mL£ mentioned in sec.
_2_9_0__(±i~It is compulsory to deliver such report and any Hifault.__o¥
doing so will render the declaration ineffective. [Sec. 290 (2)]

(iii) Adoption of decision of winding up:-The dec.ision of members

nEmmHH RIHrmELPl ± ill. HHHIH RE EEmENHEEL Hid HHillE ±E]mEmHI EIEHHPlm!E"EfimE

c:gmpany~To take the decision the following provisi.ons as per sec.

286, shall be applicable:

d*rfompany may be wound up voluntarily:

(a) if any period, fixed for the duration of
the artic es, expires; or
(b) when thatffHEL9fty
event the company is to be dissolved and if i--t-fi~a-b-b~Eni
o6jl±-==,i. '

or occurs; or
(c) if the comp€ by special resolution that the
company be wound up
`d';;;:;:::::::::i:=i:::::::::;;if:¥:::::::#:n¥
resolution.

(iv) Notification of decision:- When a decision for winding up a

:±=.r=e:s=;{`]_tt:i::k:;:.¥t.=`_==Q:FE±gt±±,==:€±_==_=n:`
S9ni±£±!£SJEapffds=_Cir€_#tet_i_nJiiprfu±be~_a.i+S_t.£i4_vyLrarltb_ip?.8L§t_e±rde._dd
-I-I++ +El.. +.`. L'J_ I -__-_ -|[ .---. L-4+ --------

office of the company is situated [Sec. 289 (I )]

-- __ _ .--,.--
(v) Appointment of liquidator:- The company in general meeting
shall appoint one or more liquidators for the purpose of winding up
the affairs and distributing the assets of the company and may fix the
renmneration to be paid to him or them. [Sec. 292 91 )]
 Fundamentals of company law 351

And on the appointment of the liquidator(s),±±jhag±d±9

±!Pg±grsJnfhallcease+Sr292(2)]

flriJ Call of general meeting:-If the wiriding up event continues for

-than one ye.ar, the liquidator shall summon a general meeting
Of the company at the end of the first year and at the end of each
as soon t er as may be convenient within
days from the end of the year. He shall lay before the meeting an
-unt of his acts and dealing and winding up
~--iz.^6*z>Bfa.rta-==+=!LL±-I,.mcu..L>.ea,zf~

qffi) Final meeting and dissolution:- As soon as the affairs of the

canpany are fully wound up, liquidator shall make up an account of
rfe winding up of showing how the winding up has been conducted
ul the property of the company has been disposed of, and there
qul shall call a general meeting of the company for the purpose of
Hgiving before it the account, and giving explanation thereof. [Sec.
"(I)]
ffi-} Submission of docuni.ents to registrar:- When the final
-ng is held,
-i_ -pr shall
a Copy 0
i`.`;!ij:¥:c_:;.;p`::eeakn°f:h;rset==et!onr=.t]i=e=:=_=i;;=ic=to the
- -___ _ _,

liquidator. However, if a quorum is not

e meetlng so ca the liquidator shall in lieu of the said
make a return that the meeting was duly summoned but no
was present thereat. [S. 296 (3)]
the holding of the final meeting and the submission of
to the Registrar, the legal entity of the company shall be

g: When a resolution is passed at the general meeting to

1 company voluntarily without any declaration of finantial
®f the company, it is called creditors voluntary winding up.
words if the directors make no declaration of solvency -I
hi members pass a winding up resolution the winding up is a
voluntary winding up. [S. 290 (3)]
 Fundamentals ofcompany law 353

-J

a7) Appeintm€nt ®f committee of inspection:-The creditors may

armint a committee of inspection consisting of not more than five
-is at the meeting held in pursuance of sec. 298 or at any
rtyuent meeting. If such a committee is appointed; the creditors
ny appoint such number of persons as they think fit but not
cmaeding five in number. [Sec. 300]

in Arrangement of annual meeting of the shareholders and

creditors:- If the event of winding up continues for more than one
.-~then the .liquidator shall summon the meeting of the
dhaolders and creditors as soon as at the end of the year>-and shall
b before the meetings amaecount of his acts Jand dealings and of the
nduct of the winding up during the proceeding year. [S. 304 (1)]

drB Final meeting and dissolution:- When the affairs of the

tirmny are fully wound up, the liquidator shall make up an account
ride windirig up showing how the winding up of the company has
conducted and the property of the company has been disposed
:ul then he shall call upon a general meeting of the company and
- ±ng of the creditors for the purpose of laying the-account
the company and diving any <explanation thereof. [Sec. 305

meetings shall be called by advertisement in which the time

and objects shall be cdntalned. Befole the meetings are held, at
orle month notice is required to be published maintaining due
[S. 305 (2)I

submission of documents to the Registrar:- When the final

is held, the liquidator, within one week of the date of the
shall send to the Registrar a copy of the account and shall
mum to him of the -holding of the meeting with date. [S. 305

After passing the resolution for winding up the

if`the winding up is completed voluntarily ofi the
of the shareholders or of the creditors or of hath df the
354 Winding up

partiesoronanyotherground,butwiththesupervisionofthe_c`o_ut
then it is called winding up Of a c_ompan¥_ subject to §upervisiQn__Qf~
`ffi:*;: prow.ides that, "vhe¥ a c?mpany h¥ _Pr_._.s,pe?Ia^l ^o^r...e+xt_ra=\
the,corn._i`
-or-di;-;3r;;silt;on,r6_solveqtowindrp:olun:_ar_i,I_y_,„th^e^.c:=.thm%,
u#a'%:u'ayn'=Vdg.tvk.at.ike--i:iinaivwi;dingu.ps.¢!allc?n{}F¥_3:.b;u_t!:_

bc:%i;i.o;sV, -c":;i;i"ff.o;i-i --o; oth_ers i; qpp_ly to. f|:__,:C_°..:.r_i+5z4a¥d

:s.:`:]=ecu;.i;,s„=:h.;fie.wi.st.;;oftif,f_:.:ur.i_,_a_n_df,:ttf^s:hcf,%%fin%
9g%t%,S};ocn°==£T`eurr#i±anu3.co±#tii-on:Vdihr=coirt;ir±nisju§t524:'~'`

J
JE]. rounds:
`Jrl uulLiLuO. The
.I iL., Object
_ _., _ _ _ of
_ _ making a winding
I-_. xp subject

supervisionofthecoutistoprotectth;interestsofthecreditorsand
contributories.InRePrf.#ceo/prdresSxutegurnyCo525,itwasheld
that such order may be passed if:
I.I to
_ __I

/(apr'theliquidatorundervoluntaryliquidationispartialoris
t, `. _ 11_ _ ___-+-, ^-
negligent in colleet`ing the assets; or
therulesrelatingtowinduparenotbeingobs.erved;or
theresolutionforwindingupwasobtainedby.fraud.

C. Effects: A winding up order subject-to supervision of the court

has the following effects:
(i) I;tr£:::]ih; :°:# tJ:?:£:t3o°fna°pveet:t]Soun{t;oranwd;nL:]gna:
up by the court. [Sec. 317]
({{) :¥n:9#tomria£ ::i::::ethteLeY£:e£°offt*{:::£:t°u: °:
to appoint the liquidators. [Sec. 318]
(]]{) tTh:C::icacnanapr%°::tveanhfafd£:i°dna£,[frti{equj::£g;
caused by such removal or death or resignation. [S.
319]
(av) gfhet¥eacco°umft?¥%e]SL]::rdnadtourp iuabje:txte:cS]::e¥is±ff

powers reasonably, without the sanction or

intervention of the court. [S. 320(1 )I

524 see-316.
525 [i868] 18 LT 77.
 Fundanentals of company law 35S

(v) when an order of winding up subject to supervision

`of the coLlri is made, it--shall, for all purposes
including +stay of suits or other proceedings, be
deemed to be an order of the ourt. It shall also
confer full authority on the court t
i=
ake calls or to
enforce calls made by the liquidators. Tsec. 320 (20]

Pi_fffr_encebetweenvoluntarywindin=ub:andco_ife±±i_=]_sQ
winding uD bv court.
` The legal entity of a company is eradicated both byT`the
iroluntary windirig up and compul§oly winding up, but in some
procedural and other aspects there are some dissimilarities between
the two which are as follows:-

¢ Decision of dissolution:- A company is voluntarily wound up

dy the decision of the shape~holders.
But compulsbry windihg rip of a company is effected by the order 6f
due court.

I Declaration of solvency:- Declaration of solvency by the

dircetors is material in case of voluntary winding up. A company's
winding up can't be said as volutary winding up unless the solvency
of the coinpany is declared by the directors. [S. 290]
On the other hand declaration of solvency is not so important in case
of compulsory winding up.

Commencement of winding up:- A voluntary winding up shall

deemed to commence at the time when the resolution for such a
winding up is passed. [S. 287]
m]( the winding up of a company by the Cout or compulsory
lrinding up shall be deemed to commence at the tim? of the
rfuEscntation of the petition for the winding up. [S. 247]

Appo_intment of liquidator:- In case of voluntary winding up,

ire liquidators are appointed by the shareholders or the creditors.
ffion. 292+299]
an the other hand, for the puapose Qf conducting the prceeedings in
ng up a company, the court usually appoints a person to be
an official liquidator. [S. 255]
tr 356 Winding up

Prepa_ratio`n of list;- in the case of voluntary winding up, the

lists of creditors and contributories are prepared by liquidator in his
own responsibility.
But in case of coinpulsory winding up lists of creditors and
contributorie§-are prepared by the order of the court.

Appointment of .cQm`prittee of inspection:-

I1,I
In a voluntary
winding up.a committee bf``inspection is appointed to observe the
winding up event.
But no committee of irispection is appointed in a compulsory
winding up. -

j]riprKindsofwindingup:-Avoluntarywindingj-pmaybeeLiirier:
(i) creditors' voluntary wi.nding up; or
(ii) members' voluntary winding up.
But there is no classification in a compulsory winding up.

Submission of documents:- In the voluntary winding up

=_HI_ i, the liquidator s>ubmits tne i necessary , documents like
accounts, returns- etc before the~ meetings 6f the creditors before the
meetingsofih;=creditorsandshareholders.
But in case of `compulsory winding up system, necessary documents
are required to be submitted before the court. i ....
Jirf Actual ` time. of dissolution:-In case of Voluntary vyin`ding.up.
ih'e actual or final dissolution of a company is-comp`leted afte`r' 90
days of the submission Qf the return and of accounts of the
dissolution to the Reedstrar.
But in a 6ompulsbry winding up when the cout declares the windiieg
up of a company, it looses its legal entity.

Differences between members voluntary windi_pE up±±

reditors voluntarv windim= u
: The basic differences b;tween member's voluntary winding
up and credit6r's voluntary winding rip are mentioned below:

Declaration.. of solvency:-. In the case of a members voluntary

winding up, the¥ directors make a declaration stating that the
 \J

Fundamentals of company law -at +357

{

;inpryhasnodebtoiifhasitwillbeabletopaythe=debtswithina
cmain period. a
rm such a declaration has not been made &`delivered to the
`_ , i - _

Far, it is called creditors voluntary winding up. [S. 290]

Circumstances of winding up:- Generally, a member3s
_._-___± _ _1.
Tphatay
-{:iwinding up occurs:
#:¥e:I:]eudt;::r;ti°sne:fb;::eTcpoa:yp::;;±roers;
. °r .

` (c)
When the company€can't carry on its business and it is
adv.isable to wind up. [S. 286]
Bun. a creditor's voluntary winding up is completed on the
aplication of the creditors of the company. It generally happens
wlren the company fails to meet the claims of the creditors.

t,I to meeting:-In case of a-member's voluntary winding up, it

is not necessary to call a meeting of creditors. |t is ;nough i-o° ;Tari'i -a`
nneting of n?embers to pass anordintry or+special resolution for` the
whding up' of the company.
ththeotherhand,inacreditor'svoluntarywindingupameetihgof
creditors is required to call either on the same day or the day next to
the day when the company passes a resolution for voluntary winding
ap. [S. 298]

EEi Appointment of committee of inspection:- In a member's

wluntary winding up there is no committ6e of inspection. But-i-ri ;
cnditor's voluntary winding up the creditors may appoint a
ounmittee of inspection at the meeting of.creditors. [S. 300]

Appointment of liquidator:- In case of a member's voluntary

!ng up, the liquidato`r is appointed at the general meeting.
in a creditor's voluntary winding up, the members and the
ors nomlnate a person to be liquidator, but if the creditors and
It company noininate two different persoks the person nominated
ty ire creditors shall be the liquidator, and if no person is nominated
b de creditors then the person nominated by the company shall be
de liquidator. [S. 299]
358 Winding up

Exercise. of powers by the liquidator:- In a.-,,

member's
voluntarty vyinding up, the liquidator can exercise some of his powers
with theTsahction -Of a special resolution of the company.
B-ut in a creditor's voluntary winding up, the liquidator can do so
with the sanction of the cout or of the committee of inspection or of
the meeting of creditors. [S. 303]

#)£e°nire°i'£gpfrve;I:;£{Cn¥t:n°gf:o:e£,be:;Serv°t[hTfaj?nr{'ingd{:g
prcecedingandthereisn6directpaticipationofthecreditorsinthis
process.
But in a creditor's vbluntary winding up the creditors have
dominating control over the winding up proceeding ,as if the
comparly was ius-olvent.

Circumstancesofdissolution:-Incaseofmember'svoluntary
winding up,thecompanyisgenerallysolventandunderthesolvency
` ` ---_-I-a -__\T 7 •1`1

of the company, the ivin-ding up proceeding is completed.

But in case of creditor's voluntary winding up, the company is
generally not solve,nt. However, our thing must be kept in mind that
`declintion of solveney' by the directors is the .core `point to decide
whether a winding up proceeding i§ of members or creditor. Even in
case of a solvent company it may be considered as ereditor's
voluntary winding up if there is no `declaration of solvency by the
directors.