Winding up of Companies

Winding up of companies: It is a process through which the property of the company is administered by the liquidator who takes control of the company, liquidates the assets and pay off the debts owed by the company and thereafter distributes the surplus, if any to the members according to the proportion of shares held by them. Dissolution is the stage where a company ceases to exist, its name is struck off by the registrar.

Modes of winding up section 297.

There are certain ways for winding up

Winding up by court: a compulsory winding up by the order of court

Voluntary winding up: member’s voluntary winding up, shareholder pass a resolution for winding up.

Creditor’s voluntary winding up

Winding up subject to the supervision of the Court

Circumstances in which company may be wound up by Court – SEC 305

A company may be wound up by the court:

• If the company has by special resolution, resolved that the company be wound up by the court.
• If default is made in delivering the statutory report to the registrar or in holding the statutory meeting or nay two consecutive annual general meetings.
• If the company does not commence its business within a year from its incorporation, or suspends its business for a whole year.
• If the number of members is reduced, in the case of private company, below two or, in the case of any other company, below seven.
• If the company is conceived or brought forth for or is or has been carrying on unlawful or fraudulent activities.
• If the company is conducting its business in a manner oppressive to any of its members or persons concerned with the formation or promotion of the company or the minority shareholders.
• If the company is run and managed by persons who fail to maintain proper and true accounts , or commit fraud, misfeasance or malfeasance in relation to the company or.
• If the company is managed by persons who refuse to act according to the requirements of the memorandum or articles or the provisions of this Ordinance or fail to carry out the directions or decisions of the Court or the Registrar of the Commission given in the exercise of powers under this ordinance.

Company when deemed unable to pay its debts Section 306

If a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding one per cent of its paid up capital or fifty thousand rupees, whichever is less, has served on the company, by causing the same to be delivered by registered post or otherwise, at its registered office. A demand under his hand requiring the company to pay the sum so due and the company has for thirty days thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditors.

A winding up a company by the Court shall be deemed to commence at the time of the presentation of the petition for the winding up.

A petition for winding up of a company shall come up for regular hearing, be proceeded with and decided in the manner laid down in Sec-9. Division Bench of High Court shall proceed hearing of the petition.

Grant Injunction Section 313

The court may, at any time after presentation of the petition for winding up a company under this Ordinance, and before making an order for its winding up. Upon the application of the company itself or of any its creditors or contributors, restrain further proceedings in any suit or proceeding against the company, upon such terms as the Court thinks fit. Sec. 315: Copy of winding up order to be filed with Registrar.

Within Fifteen days from the date of making of the winding up order, the petitioner in the winding up proceedings and the company shall file a certified copy of the order with the registrar.

If default is made in complying with the foregoing provision, the petitioner or, as the case may require, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one hundred rupees for each day during which the default continues.

On the filing of a certified copy of a winding up order, the registrar shall forthwith make a minute thereof in his books relating to the company and shall simultaneously notify in the official Gazette that such an order has been made.

Such order shall be deemed to be the notice of discharge to the servants of the company, except when the business of the company is continued.

DISSOLUTION OF COMPANY SEC-350.

When the affairs of a company have been completely wound up, or when the Court is of the opinion that the official liquidator cannot proceed with the winding up of the company for want of funds and assets or any other reason whatsoever and it is just and reasonable in the circumstances of the case that an order of dissolution of the company be made, the Court shall make an order that the company be dissolved from the date of the order, and the company shall be dissolved accordingly.

A copy of the order shall, within fifteen days of the making thereof, be forwarded by the official liquidator to the registrar, who shall make in his books a minute (statement) of the dissolution of the company.

The official liquidator makes default in complying with the requirement of this section, he shall be liable to a fine not exceeding one hundred rupees for every day during which he is in default.

Circumstances in which Company may be wound up Voluntarily Section 358

When the period (if any) fixed for the duration of the company by the articles expire or the event (if any) occurs, on the occurrence of which the articles provide that the company is to be dissolved and the company in general has passed a resolution requiring the company to be wound up voluntarily.

(If the company resolves by special resolution that the company be wound up voluntarily.

And in the subsequent provisions of this Part, the expression “resolution for voluntary winding up” means a resolution passed under clause (a) or clause (b).

Commencement of Voluntary winding up SEC 359.

A voluntary winding up shall be deemed to commence at the time of the passing of the resolution for voluntary winding up.

Effect of Voluntary winding up on Status of Company Sec 360

In case of voluntary winding up, the company shall, from the commencement of the winding up, cease to carry on its business, except so far as may be required for the beneficial winding up thereof.