2. Winding up
• 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
company
3. DIFFERENCE BETWEEN
WINDING UP
• It is A process where by dissolution of A
company is brought about.
• Company exists
• Assets of the co. is releazed and debts are
paid out of the amount so realized. if
anything remains is distributed among
the members of the co.
• During winding up , a co. may carry on
its affairs.
• Process is carried out liquidator.
• During process of winding up any person
can bring a claim for debt and the
liquidator has to pay it.
• Company can be sued
DISSOLUTION
• It is the stage of the company when
business affairs of the company have
been completely wound up
• Company existence comes to an end
• It occurs after all the process of
winding up is complete
• No business affairs remain to be
carried out
• The term of appointment of liquidator
comes to an end on dissolution of a co.
• After dissolution by a tribunal, a
debtor cannot get his claim certified
• Co. cannot be sued
4. Persons entitled to apply for winding up
• 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 uncalled shares)
• The Registrar
• Any Person authorized by Central Govt.as per sec. 243
• The official liquidator
5. 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.
6. 1.compulsory winding up
• 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 court—
1. Special resolution by the company. (on a petition by the co)
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 incorporation
4. Reduction in membership below statutory minimum
5. Inability to pay debts (Current Liabilities)
i.Demand for payment neglected
ii.Decreed debt unsatisfied
iii.Commercial insolvency
7. Contd…
6. Just and equitable that the co should be winding up
i. Deadlock in management
ii. Loss of substratum
• Where the subject mater or basis of survival of company is gone
• Where main object fails
• Where it is impossible to carry on the business except a loss
iii. Operation on minority
iv. Fraudulent purpose
v. Public interest
vi. Bubble company
vii. Failure to pay dividend
7. Default in filling balance sheet and p&l account.
8. Where co. is acted against sovereignty and integrity of India etc.
8. Procedure of Winding up by the tribunal
1. Petition
2. Statement of affairs.
3. Opportunity of representation of the co.
4. Advertisement.
5. Provisional liquidator.
6. Hearing of petition.
7. Order of tribunal.
8. No order of binding up.
i. other remedy is available.
ii.Removing the default.
9. Appointment of Liquidator.
10. Communication of Order to official Liquidator and the registrar.
11. Submitting statement of affairs to the Liquidator.
12. Advertising the order.
13. Report by the official liquidator.
14. Order of dissolution.
15. Filing copy of order with registrar.
9. Committee of Inspection
• Appoint on Directions of the tribunal.
• Determine the composition within 2 months.
• Considering the decision at contributories meeting.
• Apply to tribunal for Direction.
• Maximum members.
• Representation.
• Power.
• Meetings and proceedings.
• Registration by members.
• Vacancy in committee.
• Removal of members.
• Filling the vacancy.
10. 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 Company.
• Types of Voluntary winding up ;
1. Members voluntary winding up
2. Creditors voluntary winding up
11. Consequences of Voluntary Winding
up
• Effect on company’s business.
• Corporate existence until it is dissolved.
• Board’s power to cease.
• Avoidance of transfer of shares.
• Effect on employees.
• Distribution of properties.
• Notification as to winding up.
12. 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)
• Liquidator accepts shares as consideration
13. Rules Regarding members voluntary
winding up
• Liquidator to call creditors meeting in case of insolvency.
• liquidator 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
• Filling copy and account of return.
• Scrutiny of books and papers by official liquidators.
• Further investigation of official liquidator.
• Order of dissolution by tribunal.
• Alternative as to annual and final meeting in case of
insolvency.
14. b. Creditors voluntary winding up
• Where the company proposes to wind up voluntary
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.
15. Rules Regarding creditors voluntary winding up
Meeting of creditor’s
1. 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 inspection)
6. Vacancy in the office of liquidator may be filled up by creditors
7. Liquidator to call meeting at the end of each year (if
proceedings continue more than 1 year)
8. Final meeting and dissolution
16. Difference between members voluntary winding up and
creditors voluntary winding up
Members voluntary winding up
• There is no committee
• There is no meeting of creditors
• Liquidator appointed by the
company in the general meeting
• Power can be exercised by the
liquidator with the sanction of
special resolution passed at the
general meeting
• Controlled by the members
themselves.
Creditor voluntary winding up
• 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
17. 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 meeting.
• 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 vacancy.
• 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 voluntarily.
• 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.
