Winding Up of CompaniesMeaning and Provisions under the Companies Act 2013Company Law Notes for BCom, BBA and MBA
Winding up - Meaning and Modes
Meaning: Winding up of a company is
defined as a process by which the life of a company is brought to an end and
its property administered for the benefit of its members and creditors. In
words of Professor Gower, “Winding up of a company is the process whereby its
life is ended and its Property is administered for the benefit of its members
& creditors. 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 of a company
As per section 270 of the Companies
Act 2013, the procedure for winding up of a company can be initiated either:
a) By the tribunal or,
b) Voluntary.
a) Winding up by the tribunal:
As per new
Companies Act 2013, a company can be wound up by a tribunal in the below
mentioned circumstances:
1. When the company is unable to pay
its debts
2. If the company has by special
resolution resolved that the company be wound up by the tribunal.
3. If the company has acted against
the interest of the integrity or morality of India, security of the state, or
has spoiled any kind of friendly relations with foreign or neighboring
countries.
4. If the company has not filled its
financial statements or annual returns for preceding 5 consecutive financial
years.
5. If the tribunal by any means finds
that it is just & equitable that the company should be wound up.
6. If the company in any way is
indulged in fraudulent activities or any other unlawful business, or any person
or management connected with the formation of company is found guilty of fraud,
or any kind of misconduct.
Filling up winding up petition: Section 272 provides that a winding up
petition is to be filed in the prescribed form no 1, 2 or 3 whichever is
applicable and it is to be submitted in 3 sets. The petition for compulsory
winding up can be presented by the following persons:
a)
The company
b)
The creditors ; or
c)
Any contributory or contributories
d)
By the central or state govt.
e)
By the registrar of any person authorized by
central govt. for that purpose
FINAL ORDER AND ITS CONTENT: The tribunal after hearing the petition has
the power to dismiss it or to make an interim order as it think appropriate or
it can appoint the provisional liquidator of the company till the passing of
winding up order. An order for winding up is given in form 11.
b)
Voluntary winding up of a company: The company can be wound up voluntarily by
the mutual decision of members of the company, if:
a)
The company passes a Special Resolution
stating about the winding up of the company.
b)
The company in its general meeting passes a
resolution for winding up as a result of expiry of the period of its duration
as fixed by its Articles of Association or at the occurrence of any such event
where the articles provide for dissolution of company.
PROCEDURE FOR VOLUNTARY WINDING UP:
1. Conduct a board meeting with 2
Directors and thereby pass a resolution with a declaration given by directors
that they are of the opinion that company has no debt or it will be able to pay
its debt after utilizing all the proceeds from sale of its assets.
2. Issues notices in writing for calling
of a General Meeting proposing the resolution along with the explanatory
statement.
3. In General Meeting pass the
ordinary resolution for the purpose of winding up by ordinary majority or
special resolution by 3/4th majority. The winding up shall be started from the
date of passing the resolution.
4. Conduct a meeting of creditors
after passing the resolution, if majority creditors are of the opinion that
winding up of the company is beneficial for all parties then company can be
wound up voluntarily.
5. Within 10 days of passing the
resolution, file a notice with the registrar for appointment of liquidator.
6. Within 14 days of passing such
resolution, give a notice of the resolution in the official gazette and also
advertise in a newspaper.
7. Within 30 days of General meeting,
file certified copies of ordinary or special resolution passed in general
meeting.
8. Wind up the affairs of the company
and prepare the liquidators account and get the same audited.
9. Conduct a General Meeting of the
company.
10. In that General Meeting pass a
special resolution for disposal of books and all necessary documents of the
company, when the affairs of the company are totally wound up and it is about
to dissolve.
11. Within 15 days of final General
Meeting of the company, submit a copy of accounts and file an application to
the tribunal for passing an order for dissolution.
12. If the tribunal is of the opinion
that the accounts are in order and all the necessary compliances have
been fulfilled, the tribunal shall pass an order for dissolving the company
within 60 days of receiving such application.
13. The appointed liquidator would
then file a copy of order with the registrar.
14. After receiving the order passed
by tribunal, the registrar then publish a notice in the official Gazette
declaring that the company is dissolved.
Effect of Winding up:
Effect of winding up by tribunal (Sec.
279): According to this section, the order for winding up of a company
shall operate in favour of all the creditors and all contributories of the
company as if it had been made out or the joint petition of creditors and
contributories.
Effect
of voluntary winding up (Sec. 309): In the case of a voluntary winding up,
the company shall from the commencement of the winding up cease to carry on its
business except as far as required for the beneficial winding up of its
business. The corporate state and corporate powers of the company shall
continue until it is dissolved.
Appointment of Official Liquidator (Sec. 359)
For the purposes of this Act, so far
as it relates to the winding up of companies by the Tribunal, the Central
Government may appoint as many Official Liquidators, Joint, Deputy or Assistant
Official Liquidators as it may consider necessary to discharge the functions of
the Official Liquidator. The liquidators so appointed under this section shall
be whole-time officers of the Central Government. The salary and other
allowances of the Official Liquidator, Joint Official Liquidator, Deputy
Official Liquidator and Assistant Official Liquidator shall be paid by the
Central Government.
Powers and duties of Company liquidator
Powers and duties of Company Liquidator in case of
winding up by tribunal (Sec. 290):
1. Subject to
directions by the Tribunal, if any, in this regard, the Company Liquidator, in
a winding up of a company by the Tribunal, shall have the power:
a.
to carry on the business of the company so far
as may be necessary for the beneficial winding up of the company;
b.
to do all acts and to execute, in the name and
on behalf of the company, all deeds, receipts and other documents, and for that
purpose, to use, when necessary, the company’s seal;
c.
to sell the immovable and movable property and
actionable claims of the company by public auction or private contract, with
power to transfer such property to any person or body corporate, or to sell the
same in parcels;
d.
to sell the whole of the undertaking of the
company as a going concern;
e.
to raise any money required on the security of
the assets of the company;
f.
to institute or defend any suit, prosecution
or other legal proceeding, civil or criminal, in the name and on behalf of the
company;
g.
to invite and settle claim of creditors,
employees or any other claimant and distribute sale proceeds in accordance with
priorities established under this Act;
h.
to inspect the records and returns of the
company on the files of the Registrar or any other authority;
i.
to prove rank and claim in the insolvency of
any contributory for any balance against his estate, and to receive dividends
in the insolvency, in respect of that balance, as a separate debt due from the
insolvent, and rateably with the other separate creditors;
j.
to draw, accept, make and endorse any
negotiable instruments including cheque, bill of exchange, hundi or promissory
note in the name and on behalf of the company, with the same effect with
respect to the liability of the company as if such instruments had been drawn,
accepted, made or endorsed by or on behalf of the company in the course of its
business;
k.
to take out, in his official name, letters of
administration to any deceased contributory, and to do in his official name any
other act necessary for obtaining payment of any money due from a contributory
or his estate which cannot be conveniently done in the name of the company, and
in all such cases, the money due shall, for the purpose of enabling the Company
Liquidator to take out the letters of administration or recover the money, be
deemed to be due to the Company Liquidator himself;
l.
to obtain any professional assistance from any
person or appoint any professional, in discharge of his duties, obligations and
responsibilities and for protection of the assets of the company, appoint an
agent to do any business which the Company Liquidator is unable to do himself;
m.
to take all such actions, steps, or to sign,
execute and verify any paper, deed, document, application, petition, affidavit,
bond or instrument as may be necessary,—
1. for
winding up of the company;
2. for
distribution of assets;
3. in
discharge of his duties and obligations and functions as Company Liquidator;
and
n.
to apply to the Tribunal for such orders or
directions as may be necessary for the winding up of the company.
2. The
exercise of powers by the Company Liquidator under sub-section (1) shall
be subject to the overall control of the Tribunal.
3. Notwithstanding
the provisions of sub-section (1), the Company Liquidator shall perform
such other duties as the Tribunal may specify in this behalf.
Powers and duties of Company Liquidator in voluntary
winding up (Sec. 314):
1.
The Company Liquidator shall perform such
functions and discharge such duties as may be determined from time to time by
the company or the creditors, as the case may be.
2.
The Company Liquidator shall settle the list
of contributories, which shall be prima facie evidence of the
liability of the persons named therein to be contributories.
3.
The Company Liquidator shall call general
meetings of the company for the purpose of obtaining the sanction of the
company by ordinary or special resolution, as the case may require, or for any
other purpose he may consider necessary.
4.
The Company Liquidator shall maintain regular
and proper books of account in such form and in such manner as may be
prescribed and the members and creditors and any officer authorised by the
Central Government may inspect such books of account.
5.
The Company Liquidator shall prepare quarterly
statement of accounts in such form and manner as may be prescribed and file
such statement of accounts duly audited within thirty days from the close of
each quarter with the Registrar, failing which the Company Liquidator shall be
punishable with fine which may extend to five thousand rupees for every day
during which the failure continues.
6.
The Company Liquidator shall pay the debts of
the company and shall adjust the rights of the contributories among themselves.
7.
The Company Liquidator shall observe due care
and diligence in the discharge of his duties.
8.
If the Company Liquidator fails to comply with
the provisions of this section except sub-section (5) he shall be
punishable with fine which may extend to ten lakh rupees.
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