WINDING UP OF A COMPANY
“Winding up is a means by which the dissolution of a company is brought about and its assets
realized and applied in payment of its debts, and after satisfaction of the debts, the balance, if
any, remaining is paid back to the members in proportion to the contribution made by them to
the capital of the company.
“The liquidation or winding up of a company is the process whereby its life is ended and its
property is administered for the benefit of its creditors and members. 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.”
Modes of winding up:
The winding up of a company may be either-
(i) by the Court; or
(ii) voluntary; or
(iii) subject to the supervision of the Court.
1. Winding up of the company by the Court:
The winding up of a company by an order of the Court is called the compulsory winding up.
Section 305 of the Ordinance:
if the company has, by special resolution, resolved that the company be wound up by the
Court;
if default is made in delivering the statutory report to the registrar or in holding the statutory
meeting or any two consecutive annual general meetings;
if the company does not commence its business within a year from its incorporation, or
suspends its business for a whole year;
if the number of members is reduced, in the case of private company, below two or, below
three in case of public company and below seven in case of listed company.;
if the company is unable to pay its debts;
To pass Special Resolution by 3/4th majority of the members of the company that the
company be wound up by the Court in case if the company itself intend to file a petition and
to file the Special Resolution on Form 26 with the registrar.
To prepare a list of the assets to ascertain that the company is unable to pay its debts. 3. To
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prepare a list of the creditors
Who is competent to file petition for winding up in the Court?
The company may itself by passing a special resolution
Creditor or Creditors.
Any contributory or contributories
Registrar of Companies
Securities and Exchange Commission of Pakistan or by a person authorised by the
Commission
2. Voluntary winding up of members of the company
Voluntary liquidation is when a company decides to dissolve itself on its own terms, as approved
by the shareholders of the company. The decision usually occurs when a company decides that it
has no reason for operating anymore, or if it is not feasible to operate anymore. The key factor
here is that the dissolution of the company is not ordered by a court.
company can be wound up voluntary
(a) on expiration of the period fixed for the duration of the company by its Articles of
Association
(b) on passing of the special resolution that the company be wound up voluntarily..
PROCEDURE FOR VOLUNTARY WINDING UP
its directors make a declaration of solvency on Form 107 prescribed under Rule 269 .
passes a Special Resolution, in general meeting
Notice of resolution shall be notified in official Gazette within 10 days
Notice of appointment or change of by the company along with his consent within 10 days.
If liquidator feels that full claims of the creditors cannot be met, he must call a meeting of
creditors and place before them a statement of assets and liabilities. within 10 days of the
date of meeting
When company are fully wound up, the liquidator shall make a report and account of
winding up, call a final meeting of members.
Within a week after the meeting, the liquidator shall send to the registrar a copy of the report
and accounts on Form 112.
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DOCUMENTS REQUIRED FOR VOLUNTARILY WINDING UP BY MEMBERS
Special Resolution on Form-26
Declaration of Solvency on Form 107
Affidavit by Directors
A copy of Notice of resolution for winding up the company published in the Official
Gazette.
Copy of Preliminary report prepared by the liquidator.
Notice of final meeting.
Final report and accounts to be filed with the concerned Company Registration Office.
3. CREDITOR’S VOLUNTARY WINDING UP OF THE COMPANY
In a creditor's voluntary winding up, the decision to wind up the company is typically initiated by
the creditors rather than the shareholders or directors. This process is often pursued when a
company is unable to meet its financial obligations and is insolvent.
PROCEDURE FOR CREDITOR’S VOLUNTARY WINDING UP
Board of Directors approves the agenda of the general meeting especially the draft special resolution
for winding up of the company.
Meeting of creditors is called at 21 days notice.
Notice of the resolution passed at the creditor’s meeting shall be given by the company to the
registrar alongwith consent of the liquidator within ten days of the passing of the resolution.
If the creditors approve the winding up, they appoint a liquidator to oversee the process. The
liquidator takes control of the company's affairs, including its assets and liabilities, and proceeds to
liquidate the assets to repay creditors in accordance with their priorities under insolvency law.
The liquidator conducts an inventory of the company's assets and takes steps to realize them, such as
selling assets or collecting outstanding debts owed to the company.
The liquidator distributes the proceeds to creditors in accordance with the statutory order of priority.
The liquidator prepares a final report detailing the winding-up process and the distribution of assets to
creditors.
After completing the winding-up process and obtaining approval from creditors and the relevant
authorities, the liquidator applies for the company to be dissolved. Once dissolved, the company
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ceases to exist as a legal entity.
Winding up of the company subject to the supervision of the Court
When a company has passed a resolution for voluntary winding up, the Court may of its own
motion or on the application of any person entitled to apply to the Court for winding up a
company, make an order that the voluntary winding up shall continue, but subject to such
supervision of the Court, and with such liberty for creditors, contributories or others to apply to
the Court, and generally on such terms and conditions, as the Court thinks just.
The Court may, in deciding between a winding up by the Court and a winding up subject to
supervision, in the appointment of liquidators, and in all other matters relating to the winding
up subject to supervision, have regard to the wishes of the creditors or contributories as proved
to it by any sufficient evidence, but subject to the provisions which would have been applicable
had the company been wound up by the Court.
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