Professional Documents
Culture Documents
1. Introduction
2. Winding Up & Dissolution
3. Reasons for Winding Up A Company
4. Modes of Winding Up A Company
5. Grounds for Compulsory Winding Up
6. Power of the Court after Winding Up Order
7. Powers & Duties of the Official Liquidators
8. Declaration of Solvency
9. Members’ Voluntary Winding Up
10. Creditors’ Voluntary Winding Up
11. Winding Up under Supervision of the Court
Introduction
The winding up of a company is a process which
involves ending the life of the company and
administering its property for the benefit of its creditors
and members. In this process, the assets of the company
are collected & realised to the payment of its debt. If
after realising the creditors, company finds surplus
which is distributed among the members on the other
hand if there is any deficit, every member of the
company must contribute to the assets of the company.
After completion of these formalities prescribed by the
Companies Act, the company is dissolved and its name
is removed from the Registrar of Companies.
Winding Up & Dissolution
Generally, the terms ‘winding up’ and ‘dissolution’ used
to mean the same thing, but according to Companies Act, these
two terms are quite different by their legal procedures. The
differences between them are as below:
Points Winding Up Dissolution
Main The first stage and involves The second stage in which a
Feature realising of assets, paying off company is finally dissolved.
liabilities & distribution of
surplus if any.
Proceedings Carried out by the liquidator Order can be issued only by the
appointed by the company/court. court.
Liquidator’s Liquidators represents the Liquidator can not represent
Duties company. company.
Debt Creditors can prove their debts. Creditors cant prove their debts.
Reasons for Winding Up A Company
Modes of Winding Up
Members’ Creditors’
Voluntary Winding Up Voluntary Winding Up
Grounds for Compulsory Winding Up
The grounds on which a company can be
compulsorily wound up by the court are as follows.
1. If the company itself has passed a special
resolution for the winding up by the court.
2. If the statutory report is not filed with the
Registrar or company fails to hold the statutory
meeting within prescribed time.
3. If the number of members of the company falls
below 2 in case of private company and below 7 in
case of public company.
4. If company is unable to pay the debts in full.
Grounds for Compulsory Winding Up
A company will be deemed to be unable to pay its debt
under the following conditions:
a) If it is proved to the court’s satisfaction that the company is
unable to pay its debts.
b) If the process issued on a decree order of a court in favour of a
creditors has not been satisfied.
5. If the court is of the opinion that it is just and
equitable that the company should wound up. It
should be wound up under following
circumstances:
a) When the main object of the company for which it was
established was failed.
b) When the business of the company becomes illegal.
Petition for Winding Up (Section 439)
A petition for the winding up of a company may be
presented to the court by any of the following parties:
1. By a shareholders or contributory can present a petition
on the following grounds:
a) When No. of members of the company falls below prescribed limit.
b) When the contributory has paid the calls in arrears.
2. By the company itself by passing a special; resolution.
3. By the Registrar of the Companies.
4. By any creditor or creditors, including any contingent or
prospective creditor or creditors.
5. By the person authorised by the Central Government.
6. By the voluntary liquidator.
Power of the Court to dispose of Petition
of Winding Up
On hearing a petition for the winding up of the
company, the court may take the following steps;
1. It may dismiss the application with or without
costs.
2. It may adjourn the hearing conditionally/
unconditionally.
3. It may dispose of the application in any way it
thinks fit.
4. It may make an interim order.
5. It may order the winding up of the company with
or without coats or make any other orders as it
thinks fit.
Effects of The Winding Up Order
By Members By Creditors