Winding up of a Company

Winding up of a Company - Transcript

Winding up of a Company

Meaning Winding up of a company is the process whereby its life is ended and its property 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 Prof L C B Gower

Modes of Winding up

1 2

Compulsory winding up under orders of the tribunal Voluntary winding up

Grounds for Winding up by the tribunal
1 Special resolution 2 Default in holding statutory meeting or in delivering statutory report to the registrar 3 Failure to commence business within a year from the date of incorporation 4 Reduction in membership 5 Inability to pay its debts 6 Just and equitable 7 More Grounds 1 Not filed B S P L A C or Annual report for 5 years 2 Acted against interests of India 3 Tribunal is of the opinion that Co to be wound up being a sick company

Petition for Winding up
1 By the company 2 By any creditor 3 By any contributory 4 By the registrar 5 By any person authorized by the Central Govt 6 By official liquidator 7 By central or state govt

Statement of Affairs
Statement of Affairs to be filed along with the petition for winding up by the company

Appointment of Liquidator
Central govt constitutes a panel of professionals from Chartered Accountants Company Secretaries Cost Works Accountants Advocates Body Corporate consisting of above professionals Tribunal may appoint liquidator from this panel

Consequences of Winding up Order by the tribunal
1 Intimation to official liquidator registrar 2 Filing of a coy of winding up order with the registrar 3 Notification of order in official gazette 4 Winding up order deemed to be notice of discharge 5 Suits stayed 6 Order to favor creditors contributories 7 Official liquidator to be liquidator 8 Board s powers to come to an end

Action by the tribunal
Statement of Affairs to be made available to the liquidator Tribunal may direct for a committee of inspection

Duties of Liquidator
To conduct proceedings in winding up Sec 451 To make a report Sec 455 Custody of company s property Sec 456 To comply with directions of the creditors or contributories or the committee of inspection Sec 460 1 2 To summon meetings of creditors contributories Directions from the Tribunal Sec 460 4 5 Books to be kept by the liquidator Sec Audit of liquidator s accounts Sec 462J Central Govt s control of liquidator Information as to a pending winding up Sec 551 1

Power of the Liquidator
A Exercisable with the Sanction of the tribunal
To institute or defend any suit in the name and on behalf 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 B 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 name of the company Appoint any agent

General Powers of the tribunal in Compulsory Winding up
To stay winding up Sec 466 To settle the list of contributories Sec 467 To require delivery of property to the liquidator Sec468 To make calls Sec 470 To order payment into bank of moneys due to the company Sec 472 To exclude creditors not proving the time Sec 474 To adjust the right of contributories Sec 475 To order costs Sec 476 To summon persons suspected of having the property of the company Sec 477 To order public examination of promoters directors etc Sec 478 To arrest an absconding contributory To order the dissolution of the company Sec 481

Voluntary Winding up Effects
On status of company Sec 487 Corporate powers to continue until dissolution Sec 487 Board s powers to cease on liquidators appointments Sec 491 505 Effects on company s employees Avoidance of transfer of shares Sec 536

Kinds of Voluntary Winding
1 2 Member s voluntary winding up Creditor s voluntary winding up

Members Voluntary Winding up Condition to be satisfied
1 Declaration of solvency 2 Shareholder s resolution

Members Voluntary Winding up
Provision applicable to members voluntary winding up
Appointment of liquidator Sec 490 Board s powers to cease on appointment of a liquidator Sec 491 Power to fill a vacancy in the office of a liquidator Sec 492 Notice of appointment of liquidator to be given to the registrar Sec 493 Power of liquidator to accept shares etc as consideration sale of company property Sec 494 Duty of liquidator to call creditors meeting in case of insolvency Sec 495 Duty of liquidator to call a general meeting at the end of each year Sec 496 Final meeting and dissolution Sec 497 Alternative provisions as to annual final meeting in case of insolvency Sec 498

Creditors Voluntary Winding up
Provisions applicable 1 Meeting of creditors Sec 500 2 Notice of resolution to be given to the registrar Sec 501 3 Appointment of liquidator Sec 502 4 Appointment of a committee of inspection Sec 503 5 Fixing of liquidators remuneration Sec 504 6 Board s powers to cease on appointment of a liquidator Sec 505 7 Powers to fill a vacancy in the office of a liquidator Sec 506 8 Power of liquidator to accept shares etc as consideration for sale of company property Sec 507 9 Duty of a liquidator to call meeting of a company creditor at the end of each year Sec 508 10 Final meeting dissolution Sec 509

Difference between members Voluntary Creditors Voluntary Winding Up
Members Members
Directors declaration of solvency

Creditors
No such declaration

Meeting of members passing a No meeting of members Meeting resolution resolution No committee of inspection No Members have dominating control Members appoint the liquidator Liquidator exercises some of his Liquidator powers with the sanction of a special resolution of members resolution May be there May Creditors have dominating control Creditors have choice over members Sanction of the tribunal or the Sanction committee of inspection or of meeting of creditors of