UNIT: 5

DIRECTORS: Sec 2(13)

Directors includes any person occupying the position of Director, by whatever name called.
Thus, a Director may, therefore, be defined as a person having control over the direction,
conduct, management or superintendence of the affairs of a company. Only Individuals can be
Directors.

DIN [Director Identification Number]: Newly inserted Proviso says its compulsory for
companies to ensure that Directors have been allotted DIN. Unless DIN is allotted, no fresh
appointment can be done.




NUMBER OF DIRECTORS: Sec 251(1)

Every Public company should have atleast 3 directors and private company at least 2 directors.
However, a public company having
A] A paid-up capital of RS 5 crore or more,
B] 1000 or more small shareholders
May have 1 director elected by such small shareholders. [Small Shareholders means a
shareholder holding shares of nominal value of RS 20,000 or less in a public company]

Subject to statutory minimum limit, the Articles of a company may prescribe maximum and
minimum number of directors. Any increase in number of Directors above 12 requires the
sanction of Central Government.




APPOINTMENT OF DIRECTORS:

1] First Directors: The Articles of the company usually name the first directors by their
respective names or prescribed method of appointment. If they are not named in the Articles,
they shall be determined in writing by the subscribers of the Memorandum or a majority of them.

2] Appointment of Directors by the Company: In the case of public company or private
company, atleast 2/3d of the total Directors shall be liable to retire by rotation. Such Directors
are called rotational directors and shall be appointed by the shareholders in general meeting.

3] Appointment of Directors by Directors: The Board of Directors of a Company may appoint
directors
A] As additional Directors: They shall hold office only up to the date of the next annual
general meeting. If annual general meeting is not held during the year, they shall vacate the
office on the day on which annual general meeting should have been held.
B] In a casual Vacancy: Casual vacancy may occur when the director vacates before his term
of office expires in normal course. In such case the Board of Directors may fill the vacancy at a
meeting of the Board.
C] As alternate Director: appointed by the Board if it is authorised by 1) Articles 2) Resolution
passed by company.

4] Appointment of Directors by third parties: The Articles under certain circumstance give
power to the debenture- holders or other creditors to appoint their nominee to the Board. The
number of Directors so appointed shall not exceed 1/3
rd
of total directors and they are not liable
to retire by rotation.

5] Appointment by proportional representation: Not less than 2/3
rd
of total number of
directors can be appointed by proportional representation. Proportional representation may be
by single transferable vote or by a system of cumulative voting or otherwise. Appointment shall
be made once in 3 years.

6] Appointment of Directors by Central Government: This is done to prevent the affairs of
the company from being conducted either in the manner; a] which is oppressive to any
members of the company or b] which is prejudicial to the interests of the company or to public
interest. The company Law Board may pass the above order on a reference made to it by the
central Government or on the application- a] of not less than 100 members of the company, or
b] of members of the company holding not less than 1/10
th
of the total voting power therein.



REMOVAL OF DIRECTORS:

Directors may be removed by-
1] Shareholders: They can remove a director by passing ordinary resolution. This does not
apply however, a] Director appointed by Central government b] in case of Private company
Director holding office for life c] company which has adopted the system of electing 2/3d of its
directors by Principle of proportional representation.
Director has right to make representations in writing when notice is served of a resolution to
remove a director.

2] Central Government: Central Government may remove managerial personnel from office on
recommendation of the Tribunal. Central Government may exercise this power in the following
cases:
A] If the concerned person is been guilty of fraud, misfeasance, persistent, negligence or
defaulting carrying out his duties
B] Business of the company is not conducted and managed as per the procedure laid
C] Causes serious injury or damage to the interest of trade or business
D] Business done with the intent of to defraud its creditors, members or any other person.

3] Removal by Company Law Board: Company Law Board has every right to terminate the
director for prevention of oppression or mismanagement.






POWERS:

1]General powers of the Board: The powers of the Board of Directors is co-extensive with
those of the company. This is however subject to two conditions:
First, the Board should not do any act which is to be done by the company in General meeting
Second, the Board shall exercise its powers subject to the provisions contained in the
Companies Act, or Memorandum or Articles of the company or in any regulations made in
general meeting.

2] Powers to be exercised at Board Meetings:
The Board by means of resolution has the power to,
A] make calls on shareholders in respect of money unpaid on their shares
B] Issue debentures
C] Borrow moneys otherwise than debentures
D] Invest the funds of the company
E] Make loans

Powers to be exercised with the approval of company in general meeting:
The Board shall exercise the following powers only with the consent of the company in a
general meeting (e.g. under amalgamation)
A] to sell, lease or otherwise dispose of the whole or part of the company undertaking
B]to remit or give time for repayment of any debt due to the company by a director
C] to invest the amount of compensation received by the company
D] To borrow moneys
E] to contribute to charitable and other funds not directly relating to the business of the company
or welfare of its employees as per prescribed limits.



DUTIES OF DIRECTORS

1] Fiduciary Duties:
a) Exercise their powers honestly for the benefit of the company
b) Not place themselves in a position in which there is a conflict between their duties to the
company and their personal interest.
c) Should not make any secret profit out of their position.
d) Fiduciary duties of directors are owed to the company and not to individual shareholders.

2] Duties of care, skill and diligence: The standard of care, skill and diligence depends upon
the nature of the companys business like: the type and nature of work, division of powers
between directors and other officers, general usages and customs in that type of business.

3] Other duties of director: are
a) To attend Board meetings
b) Not to delegate his functions except if authorised
c) To disclose his interest




LIABILITIES OF DIRECTORS:

1] Liability to third parties: this may arise-
a) Liability of Directors to third parties may arise in connection with the issue of a
prospectus which does not contain the particulars required by the companies act or
which contains material misrepresentation. They may also incur personal liability:
Directors may also incur personal liability on their failure to repay application
money if minimum subscription is not been subscribed
On an irregular allotment of shares to an allottee
On their failure to repay application money if the application for the securities to
be dealt in on a recognised stock exchange is not made or refused.
On failure of the company to pay a bill of exchange, hundi, promissory note,
cheque or order for money wherein the name of the company is not mentioned in
legible characters.

b) Independently of the Act: If a director enters into a contract independently and not as
an agent of the company, then he will be personally liable.



2] Liability to the company: it may arise from-
a) Ultra Virus Act: Directors are personally liable to the company in respect of ultra virus
acts and it is not necessary to prove fraud in such cases
b) Negligence: A director may incur liability for the negligence in the exercise of his duties.
c) Breach of trust: Directors must discharge their duties as such trustees in the interest of
the company. They are liable to the company for any loss resulting from breach of trust.
d) Misfeasance: Directors are liable for Wilful Misconduct for which they can be sued in
the court of law.
e) Liability for breach of statutory duties: If there is breach in statutory duties such as
maintenance of proper account, filing of returns or observance of certain statutory
formalities.
f) Liability for acts of his co-directors: A director is liable for the act of his co-director
provided he has knowledge about it.


DISABILITY OF DIRETORS

In order to protect the interest of a company and its shareholders, the Companies Act has
imposed the following disabilities on the directors:

1] Avoidance of provisions relieving directors of liability: Any provisions in the Articles or
an agreement which exempts a director from any liability on account of any negligence, default,
misfeasance, breach of duty or breach of trust by him shall be wholly void.

2] Undischarged insolvent disqualified from being appointed as directors

3] No person to be a director of more than 20 Companies

4] Restriction on power of Board

5] Loans to directors: Without obtaining the previous approval of the central Government, a
company shall not, directly or indirectly, make any loan to
a. Any director of lending company
b. To any partner or relative of any director
c. To directors of the holding company
d. Any firm in which any such director or relative is a partner
e. Any private company of which any such director is a director or member
f. Any body corporate at whose general meeting any director control not less than 25% of
total voting powers.

6] Boards sanction for certain contracts in which particular directors are interested

7] Prohibition of assignment of office by director

8] Directors not to hold office or place of profit
The following persons shall not hold any office or place of profit in a company except
with the consent of the company accorded by special resolution:
A] Any Director of the company
B] Any partner or relative of such a director
C] Any Firm in which such a director / relative is a partner
























MANAGING DIRECTOR:

A Managing Director means a director who is entrusted with substantial powers of
management. These powers may be given to him by virtue of an agreement with the company
or by a resolution passed by a company in general meeting or by Board of Directors
through Memorandum of Association.

The Managing Director should exercise his power subject to superintendence, control and
direction of its Board of Directors. He is a whole-time director and is the chief executive of the
company.

Appointment:
Every Public or Private company having a paid-up share capital of Rs 5 crores or more should
have a Managing or whole-time director or a manager.

Disqualification of Managing Director:
No person should be appointed a managing or whole-time director who
I. Is an undischarged insolvent
II. Suspends, or has suspended, payment to his creditors
III. Or has been convicted by Court of an offence involving moral turpitude

Number of managing directors:
It cannot exceed Two. Central Government may permit a person to be managing director of
more than two companies.

Term of office:
It cannot exceed 5 years at a time.


MANAGER Sec 2(24):

Manager means an individual who has the management of the whole or substantially the
whole of the affairs of the company. He is subject to the superintendence, control and direction
of the Board of Directors.
No company should employ or appoint any person as manager, if he is either the manager or
managing director of any other company.
Office of manager cannot be assigned.
Manager not to be appointed for more than 5 years at a time.

Remuneration of Manager: he may receive remuneration either by way of monthly payment or
by way of specified percentage of the net profits of the company.

Provisions of Act regarding manager:
1] Firm or body corporate not to be appointed as manager

2] Certain persons not to be appointed as managers:

I. Is an undischarged insolvent
II. Suspends, or has suspended, payment to his creditors
III. Or has been convicted by Court of an offence involving moral turpitude

UNIT: 6 MEETINGS AND PROCEEDINGS

The meetings of a company may be classified as follows:
I] General Meetings: These are called general meetings of a company as these are meetings
of all the members of the company. This includes
1] Statutory Meeting
2] Annual General Meeting
3] Extraordinary Meeting

Class meetings of shareholders are different classes of shares where a company has more than
one class of shares.

II] Meetings of creditors and debenture- holders:
A] During the lifetime of the company
B] At the time of winding up of the company

III] Meetings of Directors




I] GENERAL MEETING OF SHAREHOLDERS

1] STATUTORY MEETING:

Every company limited by shares or guarantee and having capital shall, should conduct this
meeting within one month and not exceeding 6 months from the date of commencement of
the company. This is the first meeting of the shareholders of a public limited company and is
held only once in lifetime of a company.

Statutory report: The Board of Directors should forward a report, called as statutory report,
to every member of the company, at least 21 days before the day on which the meeting is to
be held. The notice of the meeting shall mention that the meeting is a statutory meeting.


Contents of statutory report:
a. Total shares allotted: total number of shares allotted, distinguishing shares as fully or
partly paid, to what extent they are paid-up and the consideration for which they have
allotted.
b. Cash received: the total amount of cash received by the company in respect of all the
shares allotted, distinguished as aforesaid.
c. Abstract of receipts and payments: abstract to be made within 7 days of the report.
d. Directors and auditors: the names, address and occupations of the directors, auditors
and manager and secretary, and the changes which have occurred in such address and
occupation.
e. Contracts: the particulars of any contract which is to be submitted to the meeting for its
approval or modification.
f. Underwriting contract: the extent to which any underwriting contract has not been
carried out and the reason therefore
g. Arrears of calls: the arrears due on calls from every director and from the manager.
h. Commission and brokerage: the particulars of any commission or brokerage in
connection with the issue or sale of shares and debentures to any director or to the
manager.

Certification of report:
The statutory report has to be certified as correct by not less than 2 directors of the
company. After this, the auditors of the company shall also certify it as correct with regard to first
3 contents.

A copy of the report has to be sent to the Registrar.


Procedure at the Meeting:

a. List of Members: At the commencement of statutory meeting, the Board shall produce
a list showing the names, addresses and occupation of the members of the company
and number of shares held by them. The list should be open and accessible to any
member of the company.
b. Discussion of matters relating to formational aspect: The members present at the
meeting shall be at liberty to discuss any matter relating to the formation of the company.
c. Adjournment: An adjourned meeting have the same powers as the original meeting.
The object of the adjournment may be to provide members with additional information as
to the companys affairs.

Consequences of Default: If default is made in complying with the provision, every director of
the company who in default shall be punishable with fine up to RS 5000/-



2] ANNUAL GENERAL MEETING:
Every Company shall hold in addition to any other meetings a general meeting known as Annual
general Meeting in a year. There shall not be an interval of more than 15months between
one annual general meeting and the next. The first AGM can be held within 18 months from
the date of its incorporation.

Time and Place for meeting:
Every AGM shall be called during the business hours on a day. It can be held at the
registered office of the company or at some other place within the city/ town/ village in
which the registered office of the company is situate.
Notice: 21 days prior to meeting, a notice in writing has to be sent.
Consequences of failure to hold AMG:
A] Any member can apply to the Company law board for calling the meetings
B] The Company and every officer who is in default shall be punishable with fine.
Importance of AGM:
Shareholders can exercise any control over the affairs of the company
They can confront the Directors, their elected representatives, at least once a year.
Opportunity to discuss in the meetings.
Appointment of auditors of auditors is also made at AGM.
Annual accounts are presented for consideration of shareholders and dividends are
declared in the AGM.

3] EXTRAORDINARY GENERAL MEETINGS:
Any meeting other than ordinary meetings is called extraordinary general meeting. It is called for
transacting some urgent / special business which cannot be postponed till next AGM.
It may be conveyed by:
A] Extraordinary meeting convened by the Board of Directors
On its Own: E.g.: Issue of right shares, Increase in the remuneration of managing
director, wholetime director, etc.
B] On requisition by the members:

Power of Company law Board to order meeting:
Company Law Board may call extraordinary meeting either of its own motion or on the
application of any director of the company, or of some member of the company who would be
entitled to vote at the meeting.





Requisites of a valid meeting:
1. Proper Authority: Board of Directors is the proper authority to convene a general meeting.
Board to pass a resolution to call a meeting. If Directors do not call the meeting, the members or
Company Law Board may call a meeting.

2. Notice of meeting: A proper notice of the meeting should be given to the member and others
who are entitled to attend the meeting.
Length of Notice:
A] 21 days notice in writing to the members for general meetings. The notice can be less than
21 days for annual meeting if: the members who have voting rights can voluntarily consent to a
shorter notice.
B] In case of any other meeting, of a company having share capital, by the members holding not
less than 95% of paid-up share capital as gives a right to vote
C] In case of company not having share capital, by members having not less than 95% of the
voting power exercisable at the meeting.
Notice to whom: It shall be given to:
A] Every member of the company entitled to vote
B] The person on whom the shares of any deceased or insolvent members may have dissolved;
AND
C] The auditor/ auditors of the company.
If notice is not served to every person entitled to receive notice, any resolution passed at the
meeting will be of no effect.
Omission to give notice: Deliberate omission to give notice even to a single member may
invalidate the meeting. An accidental omission to give notice or non-receipt of notice by any
member does not invalidate the proceedings at the meeting.
Contents of notice: Every notice of the company calling a meeting shall specify the place and
the day and hour of the meeting. It shall also contain a statement of the business to be
transacted at the meeting.



3] Quorum for Meeting: Sec 174
Quorum means the minimum number of members who must be present in order to
constitute a valid meeting and transact business thereat. It is fixed by Articles. If the Articles of a
company do not provide for a larger quorum, the following rules apply:
A] 5 members personally present in the case of a public company and 2 in case of any other
company shall be the quorum of the company.
B] If within half an hour a quorum is not present, the meeting, if called upon the requisition of
members, shall stand dissolved.
In other case, it shall stand adjourned to the same day, place and time in the next week.
If the Board of Directors fails to do so, the meeting stands statutorily adjourned to the same
day in the next week.
C] If at the adjourned meeting also, a quorum is not present within half an hour, the members
present shall be the quorum.

The Articles may provide for larger quorum: The Articles cannot provide for a quorum
smaller than the statutory minimum. Proxies cannot be counted for the purpose of quorum.

When should quorum be present? Article 49(1) of table A requires the quorum to be present
at the time when the meeting proceeds to transact business. It need not be present
throughout or at the time of taking vote on any resolution.

Exceptions: In the following cases, one person may constitute a meeting:
A] Where there is a class meeting of shareholders and all the shares of that class are held by
one person
B] Where the Tribunal calls or directs the calling of an annual general meeting U/S 167, it has
the power to direct that one member present in person or proxy constitute the meeting
C] Where a Tribunal orders a meeting of a company, it may direct that even one member of
the company present in person or proxy constitute the meeting
D] Where the Board of Directors delegates any of its powers to a committee, the committee
may consist of any one person which constitutes a quorum
E] If at the adjourned meeting also a quorum is not present within half an hour of the time of
the meeting, the members present are the quorum.
4] Chairman Of The Meeting: Sec 175
A Chairman is necessary to conduct a meeting. He is the Presiding Officer of the meeting.
Unless the Articles provide, the members personally present at the meeting shall elect one of
themselves to be the chairman of the meeting on a show of hands. If a poll is demanded on
the election of the chairman, it shall be taken forthwith. If some other person is elected chairman
as a result of the poll, he shall be the chairman for the rest of the meeting.

5] Minutes of Meeting: Sec 193 to 196
Minutes are a record what the Company and directors do in meetings.
Minutes of proceedings of meeting: Every Company shall keep record of all proceeding of
every general meeting / Meetings of Board of Directors / Meetings of Committee of Board. This
has to be made within 30 days of conclusion of every such meeting concerned. These records
are known as minutes
Minute Book: This is the book where record of proceedings of a meeting is kept. Separate
minute books are required to be kept for shareholders general meeting / Board of Directors
Meeting / and / Committee Meetings.
Numbering of pages: Pages of every minute book shall be consequently numbered. Attaching
and pasting of papers of proceedings of a meeting not allowed.
Signing of minutes: Each page of the minute book shall be signed by the chairman of the
same meeting or the next succeeding meeting. The last page of the record of proceedings of
each meeting in the minute book shall be dated and signed.
The minutes of each meeting should be fair and correct recording to take place. Minutes are
evidence of the proceedings recorded as per Sec 193.

PROXIES:
A member entitled to vote at a meeting may vote either in person or by proxy. A proxy is an
authority to represent and vote for another person at a meeting.
If the articles do not otherwise provide:
A] A proxy can vote only on a poll
B] A member of a Private Company cannot appoint more than one proxy to attend on the
same occasion.
C] A member of a company not having a share capital cannot appoint a proxy.
The instrument appointing a proxy shall be in writing and signed by the appointer or his
attorney duly authorized in writing.
Proxy to be deposited 48 hours before the meeting:

VOTING AND POLL:
The motions proposed in a general meeting of a company are decided on the votes of members
of the company. Members having equity shares have right to vote. Members holding
preference shares can vote only on those motions which affect the rights attached to their
capital.
The voting may be in 2 ways:
A] Voting by a show of hands: Vote in the first instance is decided by show of hands, unless
poll is demanded. Chairman to count the hands raised and to declare the result accordingly.
Proxies cannot be used on a show of hands.

B] Voting by Poll: A poll may be taken by the chairman of the meeting of his own accord. It
shall however, be taken on a demand made in that behalf by the persons mentioned below:
In case of public company having a share capital, a poll shall be taken on a demand
by any member / members present in person or proxy
In case of private company having a share capital, a poll shall be taken on demand
by one member having right to vote on the resolution and present in person or by proxy
if not more than 7 such members are personally present, and
by 2 such members present in person or proxy if more than 7such members are
personally present.
In the case of any other company, a poll shall be taken on demand by any member
/members present in person / proxy and having not less than 1/10
th
of the total voting
power in respect of the resolution
The demand for a poll may be withdrawn anytime by the person who made the demand.
Time of taking Poll: The poll demanded shall be taken forthwith. In any other case a poll shall
be taken within 48 hours of the demand for polls.
Manner of poll and result thereof: The chairman of the meeting has the power to regulate the
manner in which a poll is to be taken. The method usually followed is that of a ballot paper
on which members record their decision i.e. for or against in the motion. The result of
the poll shall be deemed to be the decision of the meeting on the motion on which the poll is
taken.

RESOLUTIONS:
The questions which generally come for consideration at general meeting of a company are
presented in the form of proposals called motions. The motion, after the close of discussion, is
formally put to vote by a show of hands or a poll. It may either be carried or rejected. If a motion
is carried, it becomes a Resolution.
Kinds of Resolution:
There are 3 kinds of Resolutions:
A] Ordinary Resolution: An Ordinary resolution is a resolution passed at a general meeting of
a company by a simple majority of votes, including vote of the chairman, if any. The votes may
be cast by members in person or proxy.
When is an ordinary resolution required?
Rectification or adoption of new name of the company
Issue of shares at discount
Alteration of share capital
Re-issue of deemed debentures
Adoption of statutory report
Passing of Annual accounts / balance sheet
Appointment of Auditors and their remuneration
Appointment of first directors [Rotating directors]
Increase or reduction in the number of directors
Appointment of Managing and Whole-time Directors
Removal of a director and appointing of director in his place
Approval of appointment of sole selling agents
Winding up a company voluntarily in certain events.
Appointment and fixation of remuneration of liquidators
Nomination of a liquidator in creditors voluntary winding up.

B] Special Resolution: A special resolution is one which satisfies the following conditions:
The intention to propose the resolution as a special resolution has been duly specified in
the notice.
The notice has been duly given of the general meeting
The votes cast in favor of the resolution by members entitled to vote are not less than 3
times the number of votes cast against the resolution by the members so entitled and
voting.
An explanatory statement setting out all material facts concerning the subject-matter of
special resolution.
A copy of every Special resolution together with the copy of the explanatory statement
shall, within 30 days of passing the resolution, be filed with the Registrar.
When is a special resolution required?
Alteration of Memorandum for changing the place of registered office from one State to
another State
Change of name of the Company with consent of Central Government
Omission or addition of the word Private
Change of name of a charitable or non-profit company by omitting the word Limited or
Private Limited
Conversion of any portion of the uncalled capital into reserve capital
Reduction of share capital
Variations of shareholders rights
Removal of companies registered office outside the local limits of any city / town / village
Keeping registers and returns at a place other than the registered office
Payment of interest out of capital
Applying to the Central Government for appointing an Inspector for investigating a
companys affairs in some cases
Appointment sole-selling / buying agent in the case of companies having paid-up share
capital of Rs 50 lakhs or more
Fixing the remuneration of Directors
Allowing a director to hold an office of profit under a company
Alteration of Memorandum to render the liability of directors unlimited
Applying to the Court to wind-up a Company
Authorizing the liquidator of a company to accept shares as consideration for the transfer
of its assets.
Disposal of books and papers of a company in voluntary winding-up

C] Resolution requiring a Special Resolution: In this case the notice shall be given not less than
14 days before the meeting at which the resolution is to be moved exclusive of the day on which
the notice is served or deemed to be served and the day of the meeting. The Company after
receiving such notice, give its members notice of the resolution in the same manner. If this is not
practicable, the company shall give notice to the members by advertisement in a newspaper.
When is special notice required?
Appointment of auditor other than the retiring ones
Provision that a retiring auditor shall not be re-appointed
Removal of director before the expiry of his period
Appointment of a director in place of one who is removed.


UNIT 7 : WINDING UP
Meaning: Winding up or liquidation of a company represents the last stage in its life. It means a
proceeding by which a company is dissolved. Here:
The assets are disposed off
The debts are paid off out of the realized assets
The surplus, if any, is then distributed among the members in proportion to their holdings
in the company.
All the above tasks are conducted by an administrator appointed known as Liquidator.
Modes of Winding Up:
There are 3 ways of winding up of a Company:
1. Winding up by the Court [Compulsory winding up]
2. Voluntary winding up
A] Members voluntary winding up
B] Creditors voluntary winding up
3. Winding up subject to Supervision of Court

1. Winding up by the Court [Sec 433 to 483]
Winding up of a company under the order of a court is also known as Compulsory Winding
upor Winding up under the supervision of the Court
Grounds for Compulsory Winding up [Sec 433]:
1. Special Resolution by the Company:
2. Default in delivering the statutory report to the Registrar or in holding statutory meeting
3. Failure to commence, or suspension of business
4. Reduction in membership: If membership reduced in case of public company, below 7 or
in case of private company, below 2, the company may be ordered to be wound up by
the court.
5. Inability to pay the debts: Commercially insolvent means that the Company is unable to
pay debts or liabilities as they arise in the ordinary course of business.



Petition [Sec 439]:
An application of the Court for winding up of a Company is made by a Petition.

Who can file the Petition?
1. Petition by the Company: By passing a Special resolution the Company may itself
present a petition.
2. Petition by any creditor / creditors:
3. Petition by any contributory / contributories: Contributory means a person liable to
contribute to the assets of the company on the event of its being wound up and includes
the holder of shares which are fully paid up.
4. Petition by all or any of the prior parties whether together or separately.
5. Petition by the Registrar: grounds are: Default by companies with respect to delivering of
statutory report to the Registrar, Company does not commence its business within a
year from its incorporation, if the number of membership is reduced [7 in case of Public
and 2 in case of Private], Company unable to pay its debt, under Just and Equitable
grounds.
6. Petition by the Central Government:
Commencement of Winding up:
The Company has to pass a Resolution for voluntary winding up before the presentation of a
petition for winding up of a company by the Court.

Advertisement of Petition: Every petition for winding up a company shall be advertised 14
days before the hearing, stating the date on which the petition was presented and the names
and addresses of petitioners.

Procedure of Winding up by the Court:
Official Liquidator: He has to be appointed by the Central Government. He shall be a whole-
time officer.
Central Government can also appoint Part- Time officer on its own accord. The Central
Government may also appoint one or more Deputy or Assistant Official Liquidators to assist the
Official Liquidator in discharge of his functions.

Liquidator: On the order of winding-up, the Official Liquidator shall, by virtue of his office,
become the liquidator of the company.





Voluntary Winding Up:


Voluntary winding-up means winding up by the members or creditors of the company without
interference by the Court. The object of voluntary winding up is that the company is left free to
settle their affairs without going to Court.

Circumstance in which a Company may be wound up voluntarily:
1.By passing an ordinary resolution
2. By passing a special resolution

Commencement of Winding up: A voluntary winding up shall be deemed to commence at the
time when the resolution [ Special or Ordinary] for its voluntary winding up is passed.

Advertisement of Resolution: Within 14 days of passing the resolution for voluntary winding
up of the Company, the company shall give notice of the resolution by advertisement in Official
Gazette, and also in some newspapers circulating in the district of registered office of the
company.


Types of Voluntary winding up:
i. Members voluntary winding up
ii. Creditors voluntary winding up



1.Members voluntary winding up:

Declaration of Solvency: In voluntary winding up of a company if declaration of its
Solvency is made accordance with the provisions of Sec 488, it is a members voluntary
winding up.
Declaration to be made by majority of Directors at a Board meeting that the Company has no
debts or that it will be able to pay its debt in full within 3 years from commencement of
winding up. Declaration to be verified by an affidavit.

The declaration shall have effect only when it is:
A] Made within 5 weeks immediately before the date of resolution, and delivered to the
registrar before that date

B] Accompanied by a copy of the report the auditors of the company on
1. Verify the solvency of the Company
2. Verify the Balance sheet of the company
3. Prepare a statement of assets and liabilities as on the last mentioned date.





2. Creditors voluntarily winding up:
A voluntary winding up of a company in which a declaration of its solvency is not made is
referred to as a Creditors voluntary winding up.

Provisions applicable to Creditors voluntary winding Up:
1. Meeting of creditors: Meeting of creditors to be called on the day on which general meeting
is to be held. Notice has to be sent to them by post.
This has to be advertised in Official Gazette and at least in 2 newspapers circulating in the
district of the registered office.

2. Notice of Resolution to be given to Registrar: that is within 10 days.

3. Appointment of Liquidator:

4. Appointment of Committee of Inspection: The creditors at their meeting may, if they think fit,
appoint a committee of inspection consisting of not more than 5 persons.

5. Liquidators remuneration: Creditors or Committee of Inspection can fix the remuneration. If it
is not fixed by them, the Court should fix the same.

6. Board power to cease on appointment of liquidator: All the powers of the Board shall come to
end on appointment of liquidators.

7. Power to fill vacancy in office of liquidator: If vacancy occurs by death, resignation or
otherwise, the creditors in general meeting may fill the vacancy.

8. Power of liquidator to accept shares etc.. as consideration for sale of property

9. Duty of liquidator to call meeting at the end of each year: It should be called within 3 months
from the close of every year.

10. Final meeting and Dissolution: As soon as the affairs of the company are fully wound up, the
liquidator shall make up an account of the winding up showing how the winding up has been
conducted and how the property of the company has been disposed off.
He shall then call a general meeting of the company and a meeting of creditors for the purpose
of laying the account before the meeting and giving explanation thereof.