Contents

 

Meaning of winding up Modes of winding up Winding up by the court Grounds of compulsory winding up Petition Power of Court Consequences of winding up order Procedure of winding up by the court Official liquidator Liquidator Provisional liquidator Statement of affairs Committee of inspection General powers of the court Dissolution of company Voluntary winding up Type f voluntary winding up Members voluntary winding up Creditors voluntary winding up Winding up subject to Supervision of Court Consequences of winding up Defunct company 

      

 

Meaning of Winding Up
€

Winding up or liquidation of a company represents the last stage in its life. It means a proceeding by which a company is dissolved. The assets of the company are disposed of, the debts are paid off out of the realised assets(or from contributions from its members), and the surplus, if any, is then distributed among the members in proportions to their holdings in the company. The two terms winding up and liquidation are used interchangeably.

Modes Of Winding Up
Winding up by a court, i.e., compulsory winding up ( Sec . 433-483) Voluntary winding up ( Sec . 484-521). Members voluntary winding up, or Creditors voluntary winding up. Winding up subject to Supervision of Court 



Winding Up By The Court (sec. 433-483)
Winding up of a company under the order of a court is also known as Compulsory Winding Up .

Grounds for Compulsory Winding Up (sec. 433)
1. 2.

3. 4. 5. 6.

Special resolution of the company( sec. 433(a)) Default in delivering the statutory report to the registrar or in holding statutory meetings(sec. 433(b)) Failure to commence, or suspension of business(sec. 433(c)) Reduction in membership(sec. 433(d)) Inability to pay its debts(sec. 433(e)) Just and equitable(sec.433(f))

Case Law
Pirie V. Stewart (1904)

Petition(sec. 439)
1. 2. 3. 4. 5. 6.

An addition to the court for the following winding up of a company is made by a petition. Petition by the company[sec.439(1)(a)] Petition by any creditor or creditors[sec.439(1)(b)] [Petition by any contributory or contributories[sec.(1)(c)] Petition by all or any of the prior parties whether together or separately[sec.439(1)(d)] Petition by the registrar[sec.439(1)(e)] Petition by the Central Government[Sec.439(1)(f)]

Power of Court
Power of Court to stay or restrain proceedings against company(sec.442) At any time after the presentation of a winding of petition and before a winding up order has been made, the company, or any creditor or contributory may apply to the court for a stay of, or restraint of, further proceedings in the court.

Powers of Court on Hearing Petition(sec.443)
On hearing a winding up petition, the court may a) Dismiss it, with or without cost; or b) Adjourn the hearing conditionally or unconditionally; or c) Make any interim order that it thinks fit; or d) Make an order for winding up the company with or without costs or any other order as if thinks fit.

Consequences of Winding Up Order
1. 2. 3. 4. 5. 6. 7.

Intimation to official liquidator and registrar(sec.444) Copy of winding up order to be filed with the registrar[sec.445(1),(1-a)(2)] Order for winding up deemed to be notice of discharge[455(3)] Suits stayed[sec.446(1)] Powers of the court[sec.(2)and(3)] Effect of winding up order(sec.447) Official liquidator to be liquidator(sec.449)

Procedure of Winding up by the Court
€ a)

b)

Official Liquidator(sec.448) There shall be attached to High Court an official liquidator appointed by the Central Government. The official receiver attached to a District Court for insolvency purposes shall be the official liquidator attached to the District Court. The Central Government may also appoint one or more Deputy or Assistant Official Liquidators to assist the official liquidator in the discharge of his functions.

€

Liquidator(sec.449) On a winding up order being made in respect of a company, the official liquidator shall, by virtue of his office, become the liquidator of the company. Style of Liquidator(sec.452) The liquidator shall be described by the style of the official liquidator of the particular company in respect of which he act and not by his individual name.

€

Provisional Liquidator(Sec.450) At any time the presentation of a winding up petition and before the making of a winding up order, the court may appoint the official liquidator to be the liquidator provisionally.

€

1. 2. 3. 4.

5.

6.

Statement of Affairs(Sec.454) Contents of statement. Within 21 days of relevant date (i.e. the date of appointment of a provisional liquidator, or where no such appointment is made, the date of winding up order), the company shall submit a statement to the official liquidator as to affairs of the company. The assets of the company, showing separately cash in hand and at bank and negotiable securities. Its debts and liabilities. Names, residence and occupations, of its creditors, stating separately the amount of secured and unsecured debts. In the case of secured debts, particulars of the securities held by the creditors, their value and dates on which they were given. The debts due to the company and names and the address of the persons from whom they are due and the amount likely to be realised. Such further information may be required by the official liquidator.

Committee of Inspection(secs.464 and 465) 


Appointment and composition of committee(sec. 464) Constitutions and proceedings of the committee(sec. 465)

General Powers of the Court Stay of winding up proceedings(sec.466) Settlement of contributories(sec.467) Payment of debts due to contributory(sec.470) Power to make calls(sec.470) Adjustment of rights of contributories(sec.475) Delivery of property(Sec.468) Exclusion of creditors(sec.474) Order as to costs(sec.476) Summoning of persons suspected of having property of the company(sec.477) Public examination(sec.478) Arrest of absconding contributory(sec.479) Meeting of creditors or contributories(sec.557)

Dissolution of the Company(sec.481)
Dissolution puts an end to the existence of a company. A company which has been dissolved no longer exists as a separate entity capable of holding property or of being sued in the court . Grounds for dissolution 1. When the affairs of the company have been completely wound up, or 2. When the court is of opinion that the liquidator cannot proceed with the winding up for want of funds and assets, or 3. For any other reason within 30 days of the order of the court , the liquidator shall send a copy of the order to the registrar who shall make in his books a minute of the dissolution of the company.

Voluntary Winding Up(Secs.480520)
Voluntary winding up means winding up by the members or creditors of a company without interference of the court. Circumstances in which a company may be wound up voluntarily(sec.484) by passing an ordinary resolution. by passing a special resolution Commencement of voluntary winding up(sec.486) Advertisement of resolution(sec.485) 



Types of Voluntary Winding Up
Members voluntary winding up, or 2. Creditors voluntary winding up
1.

Members Voluntary Winding Up
Declaration of solvency(sec.488) The declaration shall be made by a majority of the directors at a meeting of the board that the company has no debts or that it will be able to pay its debts in full within 3 years from the commencement of winding up.

Provisions applicable to a members voluntary winding up
1. 2. 3. 4. 5. 6. 7.

Appointment and remuneration of liquidators board s powers to cease on appointment of a liquidator Power to fill vacancy in office of liquidator Notice of appointment of liquidator to be given to registrar Power of liquidator to accept shares Duty to call general meeting at end of each year Final meeting and dissolution

Creditor s voluntary winding up
A voluntary winding up of company in which a declaration of its solvency is not made is referred as creditors voluntary winding up.

Provision applicable to creditors voluntary winding up
1. 2. 3. 4. 5. 6.

Meeting of creditors(sec.500) Notice of resolution to be given to registrar(sec.501)(within 10 days) Appointment of liquidators(sec.502) Appointment of committee of inspection(sec.503) Liquidation of remuneration(sec.504) Power to fill vacancy in office of liquidator(sec.506)

Consequences of winding up 


Consequences as to shareholders/members Consequences as to creditors Where the company is solvent(sec.528) Where the company is insolvent 

 

Consequences as to servants & officers Consequences as to proceedings he company Consequences as to costs

Defunct company
Procedure to be followed by the registrar 1. Letter by Registrar to inquire if company is in operation. 2. Registrar letter if no reply received within one month. 3. Publication in the Official Gazette to strike off name 4. Same procedure in winding up if no liquidator is acting or no return is received

Restoration of company s name
Application by aggrieved member or creditor within 20 years. 2. Restoration of name by Court on being satisfied. 3. Directions by the Court. 4. Certified copy of order of court to be delivered to Registered office or care of director .
1.