EORUPA SCIENCE & COMMERCE ACADEMY

Q. No. 15: What are the different modes of winding up of a public limited company? ANSWER:

DIFFERENT MODES OF WINDING UP OF JOINT STOCK COMPANY

INTRODUCTION: The winding up or liquidation of company means the adoption of legal process which all the legal affairs of the company come to an end. All the assets of the company are disposed of and amount so received and used for payment of liabilities and only surplus received is distributed among its members according to their rights under the A.O.A in accordance with companies ordinance. MODES OF WINDING UP OF A JOINT STOCK COMPANY Section 297 of the companies ordinance 1984 explain the following modes of winding up of a joint stock companys Winding up by court. Voluntary winding up of a company Winding up under the supervision of the court 1) WINDING UP BY THE COURT: Section 305 of the companies ordinance 1984 provides that a company wound up by the court of. a) By Special Resolution: If the company has by special resolution, resolved to be wound up the court. b) Statutory Meeting Note Held: If default is made in delivering the statutory report to the registrar or in holding the statutory meeting. c) Commencement of Business: If the company does not commence its business within a year from its incorporation or suspends its business for the whole year. d) Reduction in Membership: In the number of members fall below seven. e) Failure to Pay Debt: If the company is unable to pay his debt. f) Count Opinion: If the court is of opinion that it is just and equitable that the company should wound up. VOLUNTARY WINDING UP OF A COMPANY: Voluntary winding up of a company is of two kinds. A) MEMBERS VOLUNTARY WINDING UP OF A COMPANY: The section 362 of the companies ordinance, 1984 says that a winding up in the case of which declaration has been made and delivered to the registrar is known as members voluntary winding up. The following are the circumstances of the voluntary winding up of a company.

Prepared By:H. ABDUL REHMAN

0321-6485593

EORUPA SCIENCE & COMMERCE ACADEMY

a) Expiry of Period: A company may be winding voluntarily after the expiry of a period by passing a resolution in the general meeting. b) By Special Resolution: If the company resolves by a special resolution that the company be wound up the company there will be wound up. c) Statutory Declaration: If the majority directors of the company make a statutory declaration the registrar that the company will be able to pay its debts. d) Declaration of Solvency: A company may be wound up as members voluntary winding up if a declaration of the companys solvency is made by its directors or where there are more than two directors by the majority directors at the board meeting that they are of opinion that the company has on debts or that it will be able to pay its debts in full with in 3 years from the commencement of winding up. The declaration must be supported by and affidavit of the above directors and must be made within 5 weeks immediately preceding the date of the resolution for winding up and must be delivered to the register before that date and should embody a statement of the companys assets and liabilities. e) Appointment of Liquidation: Section 364 (1) of the companies ordinance, 1984 the company in general meeting of the shareholders shall appoint one or more liquidators for the purpose of winding up the affairs of a company. The share holders fix the remuneration of the liquidator on the appointment of the liquidator. All the powers of the directors of the company and other officers of the company shall cease except so far as the company I general meeting or. The liquidator sanctions the powers continuance. f) Final Meeting and Dissolution: Section 370 of the companies ordinance 1984 says that if the winding up continuous for more than one year the liquidator shall call general meeting of the shareholders and place before them the full accounts of the company and also send its copy to the registrar within one week of the meeting. The company shall be dissolved on the expiration of three months on the receipt of the copy of account and other relevant document from the liquidator and its name is struck off from the register of joint stock companies. B) CREDITORS VOLUNTARY WINDING UP: Where a declaration of solvency is not made and field with the registrar it is presumed that the company is in solvent., in such a case the company must call a meeting of its creditors for the day or the day next following the day fixed for companys general meeting for passing the resolution for winding up company is called as creditors voluntary winding up. a) Declaration of Solvency: In case of creditors voluntary winding up the company the declaration of solvency is neither made nor delivered to register. b) Meeting of the creditors: In such a case the company must call a meeting of its creditors for the day or the day next, following day fixed for companys general meeting for passing the resolution for winding up. c) Special resolution: The company has to call a general meeting of the shareholders and pass a special resolution for winding up of the company. d) Statement of Company Affairs: In the meeting of the creditors of the directors presides the meeting of the creditors in an intimate the names addressing and claims of the creditors.

Prepared By:H. ABDUL REHMAN

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EORUPA SCIENCE & COMMERCE ACADEMY

e) Appointment of Liquidator: The creditors and shareholders will nominate a person as a liquidator in their irrespective meeting. The opinion of the creditors is preferred. f) Inspection Committee: The creditors and shareholders can appoint the inspection committee consisting of five person sin each case. g) Remuneration of Liquidators: Remuneration of liquidators is fixed by the inspection committee or by the creditors. h) Final Meeting And Dissolution: The liquidator calls the final meeting of the shareholders and the creditors and places before them the full account of the company assets and with in one week after the date of meeting, liquidator sends the accounts of company and other documents to registrar. Registrar after receiving such documents after three months from the date of registration a company will be dissolved. 2) WINDING UP UNDER THE SUPERVISION OF THE COURT: Section 396 of the companies ordinance, 1984 says that a voluntary winding up of a company can also be carried under the strict supervision of the court. Where a company is being wound up voluntarily the court may order the continuation of voluntary winding up subject to its supervision on any 6 terms or conditions. The liquidator will continue to exercise all powers subject to any restriction laid down by the court. Ground for Issuing Supervision Order: The rules of winding up are not completely or strictly followed. The liquidator accts in a partial manner. The resolution of winding up is obtain by fraud. The liquidator is not taking keen interest in the matter. CONCLUSION: The company may be wound up under any of the modes discussed above. However the rules have to be followed for winding up of the company.

Prepared By:H. ABDUL REHMAN

0321-6485593