WINDING UP OF A COMPANY
P.S. Swathi SSIM Hyderabad
Introduction
Winding up of a company is a process whereby its life is ended and its property administered for the benefit of its creditors and members. An administrator, called liquidator is appointed and he takes control of the company, collects its assets, pays its debts and finally distributes any surplus amount among the members in accordance with their rights.
Types of Winding up
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There are two types of winding up Compulsory winding up or under order of the Tribunal Voluntary winding up
Compulsory winding up grounds
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By the company passing a resolution, Defaulting in holding statutory meeting or in delivering statutory report to the Registrar Failure to commence business within a year from the date of incorporation Reduction in membership below the minimum required Inability to pay debts of Rs. 1,00,000 When in the opinion of the Tribunal it is just and equitable Default of companys filling its balance sheet. If the company has acted against the interests of sovereignty and integrity of India When the company has become sick and is unlikely to become viable in future.
Procedure for Compulsory Winding up
A petition may be made by the company, any creditor, any contributory, any registrar, any person authorized by Central Government, the official liquidator or the central or state Government. Every company is to file with the Tribunal a statement of affairs along with the petition for winding up. When the company is opposing a petition for winding up, a statement of affairs is to be filled by the company.
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The consequences of the winding up order by the Tribunal are Intimation is sent to the official liquidator and the registrar Winding up order filed with the registrar within 30 days The order is notified in the Official Gazette Winding up order is deemed to be notice of discharge for employees Suits stayed unless the Tribunal gives leave to continue Order operates in the interest of all creditors and contributories Official liquidator is the liquidator and Boards powers come to an end
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The Tribunal hands over the statement of affairs to the liquidator and may direct the constitution of the Committee of Inspection. Besides this, the Tribunal has general powers like, To stay winding up, To settle the list of Contributories To set off claims To make calls To order payment of money into bank due to the company, To exclude creditors not proving on time To adjust the right of contributories, To summon persons suspected of having the property of the Company. To order public examination of promoters, Directors etc To arrest an absconding contributory To order costs and To order the dissolution of the company.
Powers and Duties of Liquidator
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To conduct the winding-up process To Discharge all the functions of the Board so long as the company is not dissolved/liquidated. Powers: Divided into 2 parts Exercisable with the sanction of the Tribunal Exercisable without sanction of the Tribunal
Powers exercisable with the sanction of the Tribunal
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To carry on the business of the company, To sell the property of the company, To raise the money, To compromise etc
Powers exercisable without the sanction of the Tribunal
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To Inspect the records and returns of the company with the Registrar To appoint an agent
Voluntary Winding up - Types
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Members voluntary winding up Creditors Voluntary Winding Up
Effects of voluntary winding up
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The voluntary winding up has effects on The status of the company The Corporate powers to continue until dissolution Boards power to cease on liquidators appointment On Companys Employees and Avoidance of transfer of shares
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In the Members voluntary winding up two conditions are to be satisfied A Declaration of solvency is made and Shareholders resolution is passed In both types of voluntary winding up i.e., winding up by members and winding up by creditors, A meeting of shareholders or creditors is held, Liquidator is appointed and notice of his appointment is given to Registrar. Boards power cease on the appointment of the liquidator
Any vacancy in the office of the liquidator is filled and a final meeting is held where a resolution for the dissolution of the company is passed.
