Prevention of oppression and

mismanagement
A company is an association of individuals working with a
common aim to achieve the purpose of the formation of the
company and to earn maximum profit. There are difference of
interests and opinions among individuals which results in
forming of majority and minority group. These
groups
requires proper balancing under strict judicial
securitization so that position of any of the group is not
misused or abused. In todays scenario , this topic has become
a significant part of the companies law and practice.
How do companies run?, Who runs them?, Whether majority
shareholders or directors run them? How majority oppress the
minority? These questions needs to be answered
for
understanding the concept of Oppression and Mismanagement.

Oppression
The Oppression of small/minority shareholders take
place by majority shareholders who controls the
company. It is understood as an act or omission on the
part of management which implies majority, who
holds or controls the management. The law, however,
has not defined what is oppression but certain
prominent case laws has defined the term
Oppression.

Mismanagement

Similarly , mismanagement is not uncommon in companies. It

means mismanagement of resources by following means:
Absence of basic records of the company
Drawing considerable expenses for personal purposes by
directors/management of the company.
Not filing documents with The Registrar of Companies
relating to compliances under The Companies Act,1956
Misuse of companies finances/funds
Sale of assets at very low prices
Violation of provisions of law and memorandum or article of
association of the company.
Making Secret Profits
Diverting company funds for personal use of directors
Continuation in office by director beyond the specified term
and not holding any qualification shares.

Winding Up
Winding up/liquidation represents the last
stage in companys life.
It is a proceeding by which a company is
dissolved.
The companys assets are disposed of , the
debts are paid off out of the realised assets ,
and the surplus , if any is then distributed
among the members in proportion to their
holdings in the company

Modes of Winding Up
There are two modes of winding up of a
company.
Winding up by the Tribunal
Voluntary winding up which may be
(a) members voluntary winding up OR
(b) creditors voluntary winding up

Winding Up by Tribunal
The is also known as compulsory winding up and
a company may be wound up in the following
cases.
Special resolution of the company
Default in delivering the statutory report to the
Registrar
Failure to commence/suspension of business
Reduction in membership
Inability to pay its debts
Just and equitable

Petition

An application to the Tribunal for the winding

up of a company is made by a petition . This
may be presented in following cases:
Petition by the company
Petition by any creditor/creditors
Petition by any contributory/contributories
Petition by Registrar
Petition by central Government

Commencement of Winding Up

Advertisement of petition
Powers Tribunal
Consequences of winding up order
Procedure of winding up by the Tribunal
Committee of inspection
Dissolution of Company
Contributory

Voluntary Winding Up
Voluntary winding up means winding up by
the members or creditors of a company
without interference by the Tribunal.
A company may be wound up voluntarily:
By passing an ordinary resolution
By passing a special resolution
Commencement of voluntary winding up
Advertisement of resolution

Types of Voluntary Winding Up

A voluntary winding up may be a:
Members voluntary winding up
Creditors voluntary winding up
members voluntary winding up
Declaration of solvency
Provisions applicable
Creditors voluntary winding up
Meeting of creditors
Notice of resolution to be given to Registrar
Appointment of liquidator
Appointment of committee of inspection
Liquidators remuneration
Boards power to cease on appointment of liquidator
Power to fill vacancy in office of liquidator

Consequences of Winding Up

Consequences as to shareholders/members
Consequences as to creditors
Preferential payments
Consequences as to servants and officers
Consequences as to proceedings against the
company
Consequences as to costs