windind up of a company - copy

8/2/2019 Windind Up of a Company - Copy

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Presented By:

Vamsi Tej

RavaliVinay

Aijaz


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Winding up of a company is the stage, where bythe company takes its last breath. It is a processby which business of the company is wound up,

and the company ceases to exist anymore.

All the assets of the company are sold, and theproceedings collected are used to discharge theliabilities on a priority basis


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Prof.Gowers definition : (Modern Company Law,4th ed., p.789)Winding up of a company is a process where by itslife is ended and its property is administrated for thebenefit of its creditors and members.

Penningtons definition : ( Company Law,2nd ed., p.628)Winding up of a company is a process by which themanagement of a companys affairs is taken out of its

directors hands, its assets are realized by theliquidator and its debts are paid out of the proceeds ofrealization and any balance remaining is returned toits members.


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There are three types of winding up of a company,viz.,

winding up by the court (secs. 433 to 483).

Voluntary Winding Up ( secs. 484 to 521). This maybe ___

(1) Members voluntary winding up, or

(2) Creditors voluntary winding up.

Winding up subject to the supervision of the court

( secs. 522 to 527).


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Winding up of a company under the order of court isalso known as compulsory winding up.

Grounds for compulsory winding up (Sec. 433)

Special resolution by the company. Default in holding statutory meeting.

Failure to commence business.

Reduction in membership. Inability to pay current liabilities.

Just and equitable.


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The court may wound up the companyon a petition submitted to it on any of the following

grounds:-

Special resolution by the company :

Sometimes, the company passes a specialresolution to the effect that the company be wound upby the court. In such cases, the court may order thewinding up of the company on a petition presented by

the company. Court has discretionary powers in thisregard and may refuse to wind up the company.


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b) Default in holding statutory meeting:Company must hold statutory meeting with

in 6 months from the date of its formation. If companyfailed in holding of such meeting , the court may order

the winding up of a company on petition presented to itby the registrar of company.

c) Failure to commence business :

Sometimes, company fails to commence the

business within one year from its registration. In suchcase, the court may order the winding up of a companyon a petition presented to it by the registrar.


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d) Reduction in membership:

Public company must have at least sevenmembers and private have two. If the membership ofany company reduced below this limit, the court mayorder the winding up of a company.

e) Inability to pay its current liabilities: Sometimes,company unable to pay its debts , the court may orderthe winding up of a company on petition presented bythe creditors.


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f ) Just and equitable :

Under this clause, the court may orderwinding up of a company under any ground. However,there must be some strong grounds for winding up. Theinterest of general public should also be considered.

An application to the court for the winding up of acompany is made by a petition.

Under Sec. 439, a petition for the winding up of acompany may be presented, subject to the provision ofthis section


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Under Sec. 439, a petition for the winding up of acompany may be presented, subject to the provision ofthis section.

An application to the court for the winding up of a

company is made by a petition:

Types of petitioneries are by the company [Sec. 439(1)(a)] ; or

by any creditor or creditors [Sec. 439(1)(b)] ; or by any contributary or contributories [Sec. 439(1)(c)] ;or

by all or any of the prior parties whether togetheror separately [Sec. 439(1)(d)] ; or


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by the registrar [Sec. 439(1)(e)] ; or by the central or state government in that behalf [Sec.

439(1)(f)]

Whether workers entitled to be heard in a windingup petitionThe interest of the workers of a company has also to

be taken into consideration while admitting a petition forwinding up the company.

The workers are entitled to appear at the hearing of thewinding-up petition,

The workers have a rights to heard before the provisionalliquidator,

The workers of the company have the same locus standi.


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Example :National Textiles workers Unions Case, it has

been held in Kilpest Pvt. Lmt. (vs) Shikkhar Mehra,

(1987) 62 Comp. Case. 717 (M.P.)That the petition filed under Sec. 433 (f) for thewinding up of a company without the activerepresentation if the workers of the company is not atall maintainable and no order for the winding upcould be passed without the express contest of theworkers of the company.


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Powers of court to stay or restrain proceedings againstcompany [Sec. 442]

At any time after the presentation of a windingup petition and before a winding up order has been made, the

company, or any creditor or contributory may apply to thecourt for a stay, or restraint of, further proceedings in thecourt.

Power of the court on hearing petition [Sec. 443]

On hearing the winding up petition, the court may -

dismiss it, with or without cost ; or adjourn the hearing conditionally or un conditionally ; or

make any interim order that it thinks fit ; or

make an order for winding up the company with or withoutcosts or any other as it thinks fit.


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Once the court makes an for the Winding -up of acompany, its consequences date back to the

commencement of winding up. The other

consequences of winding up by the court are as

follows:

Intimation to official liquidator and registrar (Sec. 444)

Copy of Winding-up order to be filed with the registrar [Sec.455 (1), (1-A) and (2)

Order for Winding-up deemed to be notice of discharge [Sec.

455 (3)]. Suits Stayed [Sec. 446 (1)].

Powers of the court [Sec. 446 (2) and (3) ].

Effect of winding -up order [Sec. 447 ].

Official Liquidator to be liquidator [Sec. 449].


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An administrator, called liquidator, is appointedand he takes control of the company, collects itsassets, pays its depts. and finally distributed anysurplus among the members in accordance withtheir rights.

The appointer may also appoint one or more

deputy or assistant liquidators to assist theliquidator in the discharge of his functions.


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Liquidator has the following duties :

To conduct proceedings in Winding-up. To make a report.

To take custody of company's property.

To comply with directions of the creditors or

contributories or the committee of inspection.

To summon meetings of creditors and contributories.

To obtain directions from the tribunal.

To keep statutory books. To get accounts audited.

Central government 's control of liquidators.

Information as to a pending Winding-up.


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Exercisable with the sanction of the tribunal

To institute or defend any suit in the name and onbehalf of the company.

To carry on the business of the company. To sell the immovable /movable property of the

company. To raise money on the security of the company. To do all such other things as may be necessary for

the Winding -up of the company. To pay ,Compromise or settle with any class of

creditors. To appoint advocate ,attorney. To compromise any call ,liability or debt.


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Exercisable without the sanction of the tribunal.

Do all acts ,execute all deeds ,receipts and other

documents. Inspect the records and returns of the company with

the registrar.

Claim in the insolvency of any contributory.

Draw ,accept ,make any bill of exchange in the nameof the company.

Appoint any agent.


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Voluntary winding up WITHOUT INTERVENTION

OF THE COURT

Members voluntary winding up Creditors voluntary winding up

Voluntary winding up UNDER THE SUPERVISION

OF THE COURT


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The company may also be wound up withoutintervention of court. And it is called voluntarywinding up. In other words, it means the winding upby the members and the creditors. It requires for

procedures : By ordinary resolution:- Sometimes, company

fixes the period for the duration of company, insuch case it required ordinary resolution.

By special resolution:- Company may, at any time,pass special resolution that company be wound upvoluntary.


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Members voluntary winding up:-

It is the winding up in the case ofwhich a declaration of solvency is made and

delivered to registrar. Creditors voluntary winding up:-

In such case, winding up shall arisewhere the company is unable to pay its debts in

full. They are given the powers to control andsupervise the winding up process.


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SI.NO. Members voluntary

Winding up

Creditors voluntary

Winding up

1. Director's declaration of

Solvency is a must

No such declaration is required.

2. Meeting of members and

passing a resolution is required

No meeting of members is necessary.

3. No committee of Inspection Such a committee may be constituted

4. Members have dominating

control

Creditors have dominating control.

5. Members appoint the liquidator Creditors have choice over members.

6. Liquidator exercises some of his

powers with the sanction of a

special resolution of members.

Sanction of the tribunal or the

committee of inspection or of meeting

of creditors


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Effects of voluntary winding-up

Voluntary Winding-up has the followingeffects :

On status of Company Corporate powers to continue until dissolution

Board's powers to cease on liquidator's appointment.

Effect of company's employees.

Avoidance of transfer of shares.


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As a matter of fact, it is voluntary winding up butunder the supervision of the court.

At any time after a company has passed a resolutionfor voluntary winding up, the court may make anorder that voluntary winding up shall continue butsubject to the supervision of the court.

The court may appoint liquidator, it may also removeany liquidator. It also has the advantages of

compulsory winding up. Because the court gets all thepowers which it can exercise in a compulsorywinding up.


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