WINDING UP AND

COMPULSORY WINDING UP
 INTRODUCTION

Winding up of a company is defined as a process by which the life of a company is

brought to an end and its property administered for the benefit of its members and
creditors. In words of Professor Gower, “Winding up of a company is the process whereby
its life is ended and its Property is administered for the benefit of its members & creditors.
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 rights
 WINDING UP
MEANING :
The winding up or liquidation of a Company means the termination of
the legal existence of a Company by stopping its business, collecting its assets and
distributing the assets among creditors and shareholders, in the manner laid down in
the Act.
MODES OF WINDING UP:
There are three methods of winding up a Company:
I. Compulsory Winding Up by the Court.
II. Voluntary Winding Up by the members themselves or by the creditors.
III. Voluntary Winding Up under the supervision of the Court.
 TYPES OF WINDING UP

• when a creditor of an insolvent company asks the

court for a wind up. If the company goes into
COMPULSORY
liquidation, the court of law appoints a liquidator for
the liquidation.
• a self-imposed wind-up and dissolution of a
VOLUNTARY company that has been approved by its
shareholders. 
BENEFITS OF WINDING UP
 PROCEDURE OF WINDING UP
 Petition Filed for Winding up of a Company
 Statement of Affairs of the Company
 Advertisement
 Appointment of Provisional Liquidator
 Send notice to the Provisional Liquidator
 Winding up Order
 Custody of Property
 Affairs of the company
 Dissolving the Company
 COMPULSORY WINDING UP
Compulsory winding up takes place when a creditor of an insolvent company asks the court for
a wind up. If the company goes into liquidation, the court of law appoints a liquidator for the
liquidation.
 The primary objective of the liquidator is to raise as much funds as needed to pay the
creditors.
 The company will then be dissolved and its name will be struck off from the list of
companies in the registrar’s office.
 Any surplus money left will be distributed amongst the shareholders of the company.
 This legal process ends with the company’s name struck off from the list of companies in the
registrar’s office.
 After the name is struck off, the company ceases to exist anymore.
 CONSEQUENCES OF WINDING UP
As Regards the Company Itself:
 Winding up doesn’t take away the existence of the company completely.
 The company continues to exist as a corporate entity till its dissolution.
As Regards the Shareholders:
 Contributors − a new statutory liability comes into existence.
 Every transaction of share during the liquefaction done without the approval of the liquidator is
termed void.
As Regards the 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.
 APPLICATION OF COMPULSORY WINDING UP
Application of Winding Up
 An application of winding up must be filed with the petition of winding up by the
following entities −
 The company
 Any creditor or creditors of the company
 Any of the contributory company
 Any person authorized by the central government
 The state government or the central government
 According to the procedures mentioned in section 439-481 of the Companies Act,
the tribunal will move on upon the receipt of the petition.
 SUPERVISION OF COURT
At any time after a company has passed a resolution for voluntary winding up, the
Court may make an order that the voluntary winding up shall continue but subject
to the supervision of the Court. A supervision order is usually made for the
protection of the creditors and contributories of the company
Such an order may be passed if :
 The Liquidator under voluntary liquidation is partial or is negligent in collecting
 The assets the rules relating to winding up are not being observed,
 The resolution for winding up was obtained by fraud.
 EFFECTS OF SUPERVISION OF COURT
 It gives jurisdiction to the court over suits and legal proceedings against the company to the same
extent as in a winding up directly by the court the court can appoint an additional liquidator or
liquidators.
 The court can remove any liquidator and fill any vacancy caused by removal, death or
resignation.
 Powers of the Liquidator:
 The liquidator in a winding up under the supervision of the Court can exercise all the powers of a
liquidator in voluntary winding up.
 But the Court can modify or limit the powers and can also give him additional power.
 After a supervision order is passed the court can exercise all powers which it might have
exercised if an order had been made for winding up by the court.
 DECLARATION OF SOLVENCY

 For the winding up of a company, it is needed for the directors to conduct a

meeting, where the majority of the directors make a declaration approved by an
affidavit that they have made a full assessment of the company and the
company is able to pay all its debts within three years of the winding up of the
company.
 It is necessary for such a declaration to be made at least 5 weeks before the
resolution to become effective.
 It should be necessarily delivered to the registrar’s office
 CONCLUSION
 The winding-up of a company shall, for purposes of section 551, be deemed to be
concluded :
 In the case of a company wound-up by order of the Court, at the date on which the order
dissolving the company has been reported by the Liquidator to the Registrar of
Companies;
 In the case of a company wound-up voluntarily, or under the supervision of the Court, at
the date of the dissolution of the company, unless at such date any funds or assets of the
company remain unclaimed or undistributed in the hands or under the control of the
liquidator, or any person who has acted as liquidator, in which case the winding-up shall
not be deemed to be concluded until such funds or assets have either been distributed or
paid into the Companies Liquidation Account in the Reserve Bank of India.
DONE BY:
ASWIN.E.R
PAVATHARANI.K
PRAVIN SHANGAR.A.R
SINDHU.C
SREENITHI.S.S
VEKHASHINI.K
THANK YOU