winding up of a company
CAARMEL ENGINEERING COLLEGE
Winding up/liquidation represents the last stage of
a company’s life.
Process of putting an end to the life of the company
It is a proceeding by which a company is dissolved.
Here the assets of the company are disposed of ,
the debts are paid off out of the realized assets ,
and the surplus , if any is then distributed among
the members in proportion to their holdings in the
Persons entitled to apply for winding up Sec. 439
Company itself by passing of a special resolution
Any Creditor or Creditors
Contributory/s (on commencement of winding up
the S.H are called contributories, liable to pay
Any Person authorized by Central Govt.as per sec.
The official liquidator
Modes of Winding up
Three modes of winding up :1. Compulsory winding up by the court
2. Voluntary winding up
3. winding up under the supervision of the court.
The winding up of a company under the order of a court
is called the compulsory winding up. Sec 433
Following circumstances of winding up by order of
1. Special resolution by the company. (on a petition by
2. Default in holding statutory meeting and in
delivering the statutory report to the Registrar
3. Failure to commence business within one year of its
4. Reduction in membership below statutory
5. Inability to pay debts (Current Liabilities)
6. Just and equitable that the co should be winding up
2. Voluntary Winding Up
Voluntary winding up means winding up by the members or
creditors of a company without interference of the court.
A company may be winding up voluntarily;
By Passing an ordinary resolution in the general meeting if
the period fixed for the duration of the Company has
expired or some event on the happening of which the
Company has to be wound up.
By Passing a special resolution for any reason whatsoever.
Within 14 days of passing any resolution it must be advertised
in the official gazette and in some important newspaper
circulating in the area of the registered office of the
Types of Voluntary winding up ;
1. Members voluntary winding up
2. Creditors voluntary winding up
a. Members voluntary winding up
Members voluntary winding up takes place only
when the company is solvent .
Its initiated by the members and is entirely
managed by them.
Rules Regarding Members
Voluntary Winding Up
Appointment of liquidator
Power to fill vacancy in the office of liquidator
Notice of appointment of liquidator to registrar
(within 10 days of such an appointment)
Duty to call creditors meeting
Duty to call general meeting at the end of the
year (if winding up continues more than 1 year)
Final meeting and dissolution
Showing how the property has been disposed,
Send a copy of account to the registrar
b. Creditors voluntary winding up
Where the company proposes to wind up voluntarly
and the directors are not in a position to make the
statutory declaration of solvency ,the winding up is
referred to as creditors voluntary winding up.
Rules Regarding creditors voluntary
Meeting of creditor’s (same day or next day
when its to be proposed)
2. Notice of resolution to be given to registrar
3. Appointment of liquidator (nominated by
members and crs)
4. Appointment of committee of inspection
5. Liquidators remuneration (by committee of
6. Vacancy in the office of liquidator may be filled
up by creditors
7. Meeting at the end of each year (if proceedings
continue more than 1 year)
8. Final meeting and dissolution
Difference between members voluntary winding
up and creditors voluntary winding up
There is no committee
There is no meeting of
Liquidator appointed by the
company in the general
Power can be exercised by the
liquidator with the sanction of
special resolution passed at
the general meeting
Controlled by the members
May appoint a committee
Meeting of contributor and
there will be corresponding
meeting of the creditors also
Both the member ad creditor
nominate the liquidator.
Power can exercised with the
sanction of the tribunals or
committee of inspection or
meeting of creditors.
Controlled by the creditors
3. Winding up subject to supervision
of the court
Court only supervises winding up procedure.
Resolution for winding up is passed by members in the general
Liberty granted to creditors, contributories or others to apply
to court for some relief.
The court may also appoint liquidators, in addition to already
appointed, or remove any such liquidator. The court may also
appoint the official liquidator, as a liquidator to fill up the
Liquidator is entitled to do all such things and acts, as he
thinks best in the interest of company. He shall enjoy the
same powers, as if the company is being wound-up
The court also may exercise powers to enforce calls made
by the liquidators, and such other powers, as if an order has
been made for winding up the company altogether by court.
Priority in disposing liabilities (Sec. 529 A & 530)
When the company is wound up, by any mode, the liabilities
shall be discharged in following priority.
1. Workman's dues.
2. Debts due to secured creditors, in case of insolvency.
3. All , taxes, cesses and rates due from the company to the
central government or a state govt.
4. All wages and salary of any employee due within four
5. All holiday remuneration becoming payable to any
6. All such debts shall be paid in full. If assets are insufficient to
meet them, they shall abate in equal proportions.