CONSEQUENCES OF

WINDING UP

NAME – KAJAL DAHIYA

ROLL NO. – 19163015
CLASS – B.COM (HONS.) 3RD SEM
SUBMITTED TO – MS. ANJANA MISRA
WINDING UP AFFECTS MANY PARTIES . THE
CONSEQUENCES OF WINDING UP ARE AS
UNDER - CONSEQUENCES
AS TO AS TO
SHAREHOLDER SERVANTS AND
S / MEMBERS OFFICERS

AS TO
PROCEEDINGS
AS TO COST
AGAINST THE
COMPANY

AS TO
DOCUMENT
 1. CONSEQUENCES AS TO
SHAREHOLDERS/MEMBERS
 In a company limited by shares, a shareholder is liable to pay
the full amount up to the face value of the shares held by
him . His liability continues even after the company goes into
liquidation. but he is then described contributory .A
contributory may be present or past. the liable of present
contributories is limited to the extent of unpaid amount on
their shares. Past contributories are required to pay when the
present contributories are unable to satisfy the contribution.
In a company limited by guarantee, the members are liable to
contribute up to the amount guaranteed by them . The object
of winding up realise the assets, pay the debts and liabilities
and distribute the surplus (if any) among the shareholders
i.e., contributories. The person who are creditors of the
company will have to prove their claims in all circumstances.
 The creditors may be secured or unsecured. A secured creditor has three
alternatives before him :
 1. He may rely on his security and ignore the liquidation.
 2. He may value his security and prove for the deficit.
 3. He may surrendered his security and prove for the whole debt .
 If a secured creditor instead of relinquishing his security and providing his
debt proceeds to realise his security, he shall be liable to pay his portion of
the expenses incurred by liquidator for preservation of the securities before
its realisation that the second creditor. The unsecured creditors are evenly
treated and for the purpose of payment they shall rank pari passu.
 The order of priority in paying off debt in winding up Shall be as follows :
 1. Workman's dues, costs and charges of winding up including liquidator's
remuneration.
 2. Preferential debts.
 3. Creditors covered by floating charges i.e., secured creditors.
 4. Unsecured creditors.
 If there is any surplus after the debts have been paid off, it shall be applied
first towards payment of preference shares capital and then towards
payment of equity share capital. If there is still some surplus, it will depend
on Articles as to how it is to be disposed of .
 2. CONSEQUENCES AS TO
SERVANTS AND OFFICERS
 A winding up shall be deemed to be a
notice of discharge to the officers and
employees of the company , except
when the business of the company is
continued. Such a discharge Shall
relieve them of all obligations under
their contract of service . A voluntary
winding up shall also operate as a notice
of discharge to the company's servants
 3. CONSEQUENCES AS TO PROCEEDINGS
AGAINST THE COMPANY

 when a winding up order has been made

or the official liquidator has been
appointed as provisional liquidator, no
suit or other legal proceeding against
the company shall be commenced except
by leave of the NCLT .In voluntary
winding up also, the NCLT may restrain
proceeding against the company it thinks
fit.
 4. CONSEQUENCES AS TO
COSTS
 If assets are insufficient to satisfy liabilities, the
court may order for the payment of the costs
,charges and expenses of the winding up out of
the assets of the company. The payment shall be
made in such order of priority Inter se as the
Court think just. Similarly all costs, charges and
expenses properly incurred in a voluntary winding
up, including the remuneration of a liquidator, shall
be paid out of the assets of the company in the
priority to all other claims. The payment should
however be subject to the right of secured
creditors.
 5. CONSEQUENCES AS TO
DOCUMENTS
 when the affairs of a company have been completely wound up and it is
about to be dissolved, it books and papers and those of the liquidator, may
be disposed of as follows –
 1. In the case of winding up by NCLT in such a manner as the NCLT
directs;

 2. In the case of members' voluntary winding up, in such manner as the

company by special resolution directs ; and

 3. In the case of creditors voluntary winding up if such manner as the

committee of inspection or , if there is no such committee, as the creditors
of the company may direct.

 After the expiry of 5 years from the dissolution of the company , no

responsibility shall rest on the company , the liquidator or any person to
whom custody of books and papers has been committed, if any book or
paper could not be produced to any person interested therein.