winding up of a company

PREPARED BY;
LENY MICHAEL
CAARMEL ENGINEERING COLLEGE
PATHANAMTHITTA

Winding up

Winding up/liquidation represents the last stage of

a companys life.
Process of putting an end to the life of the company
It is a proceeding by which a company is dissolved.
Here the assets of the company are disposed of , the
debts are paid off out of the realized assets , and the
surplus , if any is then distributed among the
members in proportion to their holdings in the
company

Persons entitled to apply for winding up Sec. 439

1.
2.
3.

4.
5.

6.

Company itself by passing of a special resolution

Any Creditor or Creditors
Contributory/s (on commencement of winding up
the S.H are called contributories, liable to pay
uncalled shares)
The Registrar
Any Person authorized by Central Govt.as per sec.
243
The official liquidator

Modes of Winding up
Three modes of winding up :1. Compulsory winding up by the court
2. Voluntary winding up
3. winding up under the supervision of the court.

1. Compulsory winding up by the court

The winding up of a company under the order of a court

is called the compulsory winding up. Sec 433
Following circumstances of winding up by order of
court
1. Special resolution by the company. (on a petition by
the co)
2. Default in holding statutory meeting and in
delivering the statutory report to the Registrar
3. Failure to commence business within one year of its
incorporation

4. Reduction in membership below statutory

minimum
5. Inability to pay debts (Current Liabilities)
6. Just and equitable that the co should be winding up

2. Voluntary Winding Up
Voluntary winding up means winding up by the members or
creditors of a company without interference of the court.
A company may be winding up voluntarily;
By Passing an ordinary resolution in the general meeting if
the period fixed for the duration of the Company has expired
or some event on the happening of which the Company has
to be wound up.
By Passing a special resolution for any reason whatsoever.
Within 14 days of passing any resolution it must be advertised
in the official gazette and in some important newspaper
circulating in the area of the registered office of the
Company.

Types of Voluntary winding up ;

1. Members voluntary winding up
2. Creditors voluntary winding up

a. Members voluntary winding up

Members

voluntary winding up takes place only

when the company is solvent .
Its initiated by the members and is entirely
managed by them.

Rules Regarding Members Voluntary Winding Up

1.
2.
3.
4.
5.
6.

Appointment of liquidator
Power to fill vacancy in the office of liquidator
Notice of appointment of liquidator to registrar (within
10 days of such an appointment)
Duty to call creditors meeting
Duty to call general meeting at the end of the year (if
winding up continues more than 1 year)
Final meeting and dissolution

Showing how the property has been disposed,

Send a copy of account to the registrar

b. Creditors voluntary winding up

Where

the company proposes to wind up voluntarly

and the directors are not in a position to make the
statutory declaration of solvency ,the winding up is
referred to as creditors voluntary winding up.

Rules Regarding creditors voluntary winding up

1.
2.
3.
4.
5.
6.
7.
8.

Meeting of creditors (same day or next day when its to

be proposed)
Notice of resolution to be given to registrar
Appointment of liquidator (nominated by members and
crs)
Appointment of committee of inspection
Liquidators remuneration (by committee of inspection)
Vacancy in the office of liquidator may be filled up by
creditors
Meeting at the end of each year (if proceedings continue
more than 1 year)
Final meeting and dissolution

Difference between members voluntary winding

up and creditors voluntary winding up
There is novoluntary
committee
Members
2. There is no meeting of
winding
up
creditors
1.

3.

4.

5.

Liquidator appointed by the

company in the general
meeting
Power can be exercised by the
liquidator with the sanction of
special resolution passed at
the general meeting
Controlled by the members
themselves.

Creditor voluntary
winding up
1.
2.

3.
4.

5.

May appoint a committee

Meeting of contributor and
there will be corresponding
meeting of the creditors also
Both the member ad creditor
nominate the liquidator.
Power can exercised with
the sanction of the tribunals
or committee of inspection
or meeting of creditors.
Controlled by the creditors

3. Winding up subject to supervision of the court

Court only supervises winding up procedure.

Resolution for winding up is passed by members in the general
meeting.
Liberty granted to creditors, contributories or others to apply
to court for some relief.
The court may also appoint liquidators, in addition to already
appointed, or remove any such liquidator. The court may also
appoint the official liquidator, as a liquidator to fill up the
vacancy.

Liquidator is entitled to do all such things and acts, as he

thinks best in the interest of company. He shall enjoy the
same powers, as if the company is being wound-up
voluntarily.
The court also may exercise powers to enforce calls made
by the liquidators, and such other powers, as if an order has
been made for winding up the company altogether by court.
(Section 526)

Priority in disposing liabilities (Sec. 529 A & 530)

When the company is wound up, by any mode, the liabilities
shall be discharged in following priority.
1. Workman's dues.
2. Debts due to secured creditors, in case of insolvency.
3. All , taxes, cesses and rates due from the company to the
central government or a state govt.
4. All wages and salary of any employee due within four
months.
5. All holiday remuneration becoming payable to any
employee.
6. All such debts shall be paid in full. If assets are insufficient
to meet them, they shall abate in equal proportions.