Under section 488 the directors in the Board meeting make a declaration by an affidavit that the company has no debts or it will be able to pay its debts within 3 years from the commencement of winding up.
This declaration should me made within 5 weeks immediately preceding the date of passing the resolution and shall be delivered to the registrar before that date.
In case of a solvent company, all claims of its creditors when proved are fully met
ORDER OF PAYMENT : all assets are realized and list of claimants is finalised, the liquidator commences making payments. First comes claims of the secured creditors, second comes costs, charges and expenses of winding up, third comes preferential creditors, fourth comes creditors secured by floating charge, fifth comes unsecured or ordinary creditors and at the end comes members or contributories
PREFERENTIAL PAYMENTS : payments made to certain unsecured creditors in priority to all other debts on winding up of the company. These payments are :
All revenues, taxes, cesses and rates due from the company to the Central or State Government or to a local authority
All wages or salary of an employee
All accrued holiday remuneration
Amounts under Worker’s Compensation Act 1923
Sums due to an employee from provident fund, pension fund, gratuity fund, etc
Means a company which has never commenced business or which has ceased to carry business
Under section 560, the Registrar of Companies can strike the name of such a company from the companies’ register
He has to send to the company by post a letter enquiring whether the company is carrying on business or is in operation
If no reply is received within one month, he must send within the next 14 days a registered letter to warn the company
If no satisfactory reply is received within one month, he must send to the company by post and publish in the official gazette that the company’s name will be striked off within three months and hence the company will be dissolved