WINDING UP COMPULSORY AND VOLUNTARY

1. WINDING UP OF
COMPANY

2. Flow of Contents
 Meaning
 Modes of Winding Up
 Liquidator
 Winding up VS Dissolution

3. Meaning
 The process of bringing to an end the legal
personality of company as a corporate body.
During this process the company ceases to
carry on its usual business, the assets are
realized, the proceeds are utilized in paying
off debts and the surplus , if any, is
distributed amongst contributories.

4. Modes of Termination
 Compulsory winding
 Voluntary winding up which can be either
members’ voluntary winding up or creditors’
winding up

5. Compulsory Winding up
 It is one which takes place by an order of
National Company Law Tribunal (NCLT).
 There could be numerous grounds for the
decision;

6.  Default in holding statutory meeting or
statutory Report
 Failure to Commence Business or
Suspending Business
 Reduction in Membership Below Statutory
Minimum
 Inability to pay Debt
 Just and Equitable to order winding up

7.  NCLT has wide discretionary powers and so
may order winding up if it is of opinion that it
is just and equitable to do so. However, it is
exercised only in the interest of the company,
its employees , shareholders and creditors
and in public interest.

8. Some of the cases
 Co fails to achieve any of its main objects
 It is impossible to carry on its business
except at a loss and there is no reasonable
hope of making profits
 Existing assets are insufficient to meet known
existing liabilities
 If the company is only a bubble” i.e has no
real business
 If the object for which it is formed is illegal

9. Volunatary Winding up
 A company can be wound up voluntarily
where:
Time fixed by Articles has expired
Articles specify an event on occurance of
which the co is to be dissolved and such event
occurs
Company voluntarily decides to wind up by
special resolution

10. Members’ voluntary winding up
 This is permissible only when the co is
solvent. So, all the directors or majority have
to make a declaration at the BOD meeting that
they are of opinion that co has no debts at all
or can pay of all debts within 3 years from the
date of commencement of the process.
 Such call can be made before 5 weeks
preceding the general meeting and need to be
filed with ROC and need to accompanied by
reports of auditors of co.

11. Creditors’ Winding Up
 If a company proposes to have creditors’
voluntary winding up, it will have to organize
meeting of its creditors on the same day or
the next day of general meeting in which the
resolution for voluntary winding up is
proposed to be passed.

12. Liquidation
 The proceeding of liquidation is conducted by
an administrator called,” liquidator” under the
supervision of the Tribunal. The liquidator can
be govt.official or CAs,CSs, lawyers.

13. Winding up VS dissolution
 They are not identical procedures. Former is
the process of terminating the life of a
company during which the corporate
existence of a company continues. However,
dissolution on the other hand is the end result
of winding up in which the name of the
company is struck off by the registrar from
ROC

14. Thank you !!!!!!