VOLUNTARY WINDING UP

OF A COMPANY.
Winding Up

 Winding up of a company is the stage , where by the

company takes its last breath. It is a process by which
business of the company is wound up, and the company
ceases to exist anymore. All the assets of the company are
sold, and the proceedings collected are used to discharge
the liabilities on a priority basis
WAYS OF WINDING UP
 There are three ways, in which a company may
be wound up. They are :

 Winding up by the court.

 Voluntary winding up,

Members Voluntary winding up.
Creditiors Voluntary winding up.

 Winding up subject to supervision of the court

Winding Up by the Court
 If the company itself, has passed a special resolution in
the general meeting to wound up its affairs. Special resolution
means, resolution passed by three-fourth (3/4") of the members
present.

 If there is a default, in holding the statutory meeting or in

delivering the statutory report to the Registrar.

 A company which is limited by shares, and a company limited by

guarantee having share capital, is required to hold a " Statutory
meeting" of its members, within six months, and
after one month, from the date of commencement of it's
business.
Continued…
 If the company fails to commence it's business within
one year from the date of it's incorporation, or suspends it's
business for a whole year.
 A company limited by shares, has to obtain a "certificate of
commencement" of business
 from the registrar. Unless it obtains such certificate, it cannot
carry on it's business operation.
 If the number of members, in a public company is reduced to
less than seven, and in case of private company less than two.
 The statutory requirement of minimum number of members in a
public company is seven, and in case of private company, it is
two (sec 12)
 If the court, itself is of the opinion that the company should
be wound up
Consequences of court passing an
order for winding up

 Court will send notice to an official liquidator, to take change of the

company. He shall carry out the process of winding up, ( sec. 444)
 The winding up order, shall be applicable on all the creditors and
contributories, whether they have filed the winding up petition or not.
 The official liquidator is appointed by central Government ( sec. 448)
 The company shall relevant particulars, relating to, assets, cash
in hand, bank balance, liabilities, particulars of creditors etc, to
the official liquidator. ( sec. 454)
 The official liquidator shall within six months, from the date of winding
up order, submit a preliminary report to the court regarding :
 ±Particulars of Capital
±Cash and negotiable securities
±Liabilities
±Movable and immovable properties
±Unpaid calls, and
±An opinion, whether further inquiry is required or not (455)
Who Can Apply To Court, For Winding
Up Petition?( SEC 439)

Following persons can apply to the court, for

petition for winding up:
 The company itself
 The creditor
 Any Contributory
 Registrar
 Any person authorised by central government, in
case of oppression or mismanagement
Voluntary Winding Up
 A company may ,voluntary wind up it's
affairs, if it is unable to carry on it's business,
or if it was formed only for a limited purpose,
or if it is unable to meet it's financial
obligation, and etc. A company may voluntary
wind up itself, under any of the two modes:

‡Members voluntarily winding up

‡Creditors voluntarily winding up
Continued …
 A company may voluntarily wind up itself, either by passing :
 An ordinary resolution, where the purpose for which the company was formed has
completed, or the time limit for which the company was formed, has expired. or
 By way of special resolution or
 Both types of resolution shall be passed in the general meeting of
the company. (484)

 Once the resolution of voluntarily winding up is passed, then the company may

be wound up, either through :

 Members voluntarily winding up, or

 Creditors voluntarily winding up

 The only difference between the above two, is that incase of members voluntarily

winding up, Board of Directors have to make a declaration to the effect, that
company has no debts. (488)
Members Voluntarily Winding Up

 Directors of the company shall call for a

Board of Directors Meeting, and make a
declaration of winding up, accompanied by
an Affidavit, stating that; The company has
no debts to pay, or
 The company will repay it's debts; if any,
within 3 years from the commencement of
winding up, as specified in declaration (488)
Creditors Voluntarily Winding Up
 Where the resolution for winding up has been passed, but
the Board of Directors are not in a position to give a declaration
on the liability of company, they may calla meeting of creditors,
for the purpose of winding up. (500)

 It is the duty of Board of Directors, to present a full statement of

company 's affairs, and list of creditors Along with their dues,
before the meeting of creditors. [500 (3)]

 Whatever resolution, the company passes in creditor's meeting,

shall be given to the Registrar within ten days of it's passing.
(501)
MEMBERS V/S CREDITORS VOLUNTARY
WINDING UP
Can be resorted by solvent companies 
Is resorted to by insolvent companies.
and requires filing of a declaration of
solvency by the directors with the
Registrar.
A meeting of creditors is called soon
after a meeting of the members.
Need not have a creditors· meeting.
If members and creditors nominate two
Liquidator is appointed by the different persons as liquidators, then
members. creditors nominee shall be the liquidator.

The remuneration of the liquidator/(s) is It is done by the ´Committee Inspection

fixed by the members. (Sec-490) or the creditors.(Sec-504)
Who shall carry out the winding up
procedure ?
 Company in the general meeting [ in which resolution for winding up is passed] ,
and the creditors in their meeting, appoint liquidator. They may either agree on
one liquidator, or if two names are suggested, then liquidator appointed by
creditor shall act. ( 502)
 Any director, member or creditor may approach the court, for direction that ;

 ±Liquidator appointed in general meeting shall act, or

±He shall act jointly with liquidator appointed by creditor, or
±Appointing official liquidator, or
±Some other person to be appointed as liquidator. [502 (2)]
 The remuneration of liquidator shall be fixed by the creditors, or by the court
(504)

 On appointment of liquidator, all the power of Board of Directors shall cease.

(505)

 In case, the winding up procedure, takes more than one year, then he will

have to call a general meeting, and meeting of creditors, at the end of
each year, and he shall present, a complete account of the procedure, and
the status / position of liquidation (505)
When affairs of the company are fully
wound up ( 509)
The liquidator shall take the following steps, when affair of the company
are fully wound up:

 Call a general meeting, and meeting of creditors, and lay before it,

complete picture of accounts, winding up procedure and how the properties of
company are disposed of .
 The meeting shall be called by advertisement, specifying the time, place and
object of the meeting.

 The liquidator shall send to the Registrar and official liquidator copy of account,

within one week after the meeting.
 If from the report, official liquidator comes to the conclusion, that affairs
of the company are not being carried in manner prejudicial to the interest
of it' s members or public, then the company shall be deemed to be
dissolved, from the date of report to the court.
 However, if official liquidator comes to a finding, that affairs have been
carried in a manner prejudicial to intent of members or public, then court
may direct the liquidator to investigate further
Distribution of property of company on
voluntarily winding up [ both members and
creditors voluntarily winding up]

 Once the company is fully wound up, and

assets of the company sold or distributed, the
proceedings collected are utilised to pay off
the liabilities. The proceedings so collected
shall be utilised to pay off the creditors in
equal proportion . 
 Thereafter any money or property left, may
be distributed among members according to
their rights and interests in the company
Winding Up Subject To Supervision Of
Court
 Winding up subject to supervision of court, is different from "Winding up by
court."
 Here the court only supervise the winding up procedure. Resolution for winding
up, is passed by members in the general meeting. It is only for some specific
reasons, that court may supervise the winding up proceedings. The court may
put up some special terms and conditions also.
 However, liberty is granted to creditors, contributories or other to apply to court
for some relief. (522)
 The court may also appoint liquidators, in addition to already appointed, or
remove any such liquidator. The court may also appoint the official liquidator, as
a liquidator to fill up the vacancy.
 Liquidator is entitled to do all such things and acts, as he thinks best in
the interest of company. He shall enjoy the same powers, as if the company is
being wound-up voluntarily.

 The court also may exercise powers to enforce calls made by the liquidators,

and such other powers, as if an order has been made for winding up
the company altogether by court. ( 526
Dissolution
 Dissolution puts an end to the existence of a
company. A company which has been
dissolved no longer exists as a separate
entity capable of holding property or of being
sued in the Tribunal.
Difference between Winding Up and
Dissolution
 Dissolution is part of winding up the business
affairs of a company; it means the assets are
distributed and the board of directors ceases
to exist.
 Winding up includes paying taxes,
terminating contracts, etc., leading to
the proper time and conditions for dissolution.
 Some states require a waiting period, and it
may vary for different types of companies
(profit, non-profit, etc)
SUVIR AGGARWAL—08D0348
ROCKY KHANDELWAL– 08D0343
GAURAV GOEL– 08D0387