Presented By: Vamsi Tej Ravali Vinay Aijaz

Winding

up of a company is the stage, where by the company takes its last breath. It is a process by which business of the company is wound up, and the company ceases to exist anymore.
the assets of the company are sold, and the proceedings collected are used to discharge the liabilities on a priority basis

All

 Prof.Gowers

Winding up of a company is a process where by its life is ended and its property is administrated for the benefit of its creditors and members.

definition : (Modern Company Law,4

th

ed., p.789)

Penningtons

Winding up of a company is a process by which the management of a companys affairs is taken out of its directors hands, its assets are realized by the liquidator and its debts are paid out of the proceeds of realization and any balance remaining is returned to its members.

definition : ( Company Law,2

nd

ed., p.628)

There are three types of winding up of a company, viz.,

winding up by the court (secs. 433 to 483). Voluntary Winding Up ( secs. 484 to 521). This may be ___ (1) Members voluntary winding up, or (2) Creditors voluntary winding up. Winding up subject to the supervision of the court ( secs. 522 to 527).

Winding up of a company under the order of court is also known as compulsory winding up.

Grounds for compulsory winding up (Sec. 433) Special resolution by the company. Default in holding statutory meeting. Failure to commence business. Reduction in membership. Inability to pay current liabilities. Just and equitable.

The court may wound up the company on a petition submitted to it on any of the following grounds: Special resolution by the company : Sometimes, the company passes a special resolution to the effect that the company be wound up by the court. In such cases, the court may order the winding up of the company on a petition presented by the company. Court has discretionary powers in this regard and may refuse to wind up the company.

b) Default in holding statutory meeting: Company must hold statutory meeting with in 6 months from the date of its formation. If company failed in holding of such meeting , the court may order the winding up of a company on petition presented to it by the registrar of company. c) Failure to commence business : Sometimes, company fails to commence the business within one year from its registration. In such case, the court may order the winding up of a company on a petition presented to it by the registrar.

d) Reduction in membership: Public company must have at least seven members and private have two. If the membership of any company reduced below this limit, the court may order the winding up of a company.
e) Inability to pay its current liabilities: Sometimes, company unable to pay its debts , the court may order the winding up of a company on petition presented by the creditors.

f ) Just and equitable : Under this clause, the court may order winding up of a company under any ground. However, there must be some strong grounds for winding up. The interest of general public should also be considered.
An application to the court for the winding up of a company is made by a petition. Under Sec. 439, a petition for the winding up of a company may be presented, subject to the provision of this section

Under Sec. 439, a petition for the winding up of a company may be presented, subject to the provision of this section. An application to the court for the winding up of a company is made by a petition:

Types of petitioneries are by the company [Sec. 439(1)(a)] ; or by any creditor or creditors [Sec. 439(1)(b)] ; or by any contributary or contributories [Sec. 439(1)(c)] ;or by all or any of the prior parties whether together or separately [Sec. 439(1)(d)] ; or

by the registrar [Sec. 439(1)(e)] ; or by the central or state government in that behalf [Sec. 439(1)(f)]
Whether workers entitled to be heard in a winding up petition The interest of the workers of a company has also to be taken into consideration while admitting a petition for winding up the company. The workers are entitled to appear at the hearing of the winding-up petition, The workers have a rights to heard before the provisional liquidator, The workers of the company have the same locus standi.

 Example

National Textiles workers Unions Case, it has been held in Kilpest Pvt. Lmt. (vs) Shikkhar Mehra, (1987) 62 Comp. Case. 717 (M.P.) That the petition filed under Sec. 433 (f) for the winding up of a company without the active representation if the workers of the company is not at all maintainable and no order for the winding up could be passed without the express contest of the workers of the company.

Powers of court to stay or restrain proceedings against company [Sec. 442] At any time after the presentation of a winding up petition and before a winding up order has been made, the company, or any creditor or contributory may apply to the court for a stay, or restraint of, further proceedings in the court. Power of the court on hearing petition [Sec. 443] On hearing the winding up petition, the court may dismiss it, with or without cost ; or adjourn the hearing conditionally or un conditionally ; or make any interim order that it thinks fit ; or make an order for winding up the company with or without costs or any other as it thinks fit.

Once the court makes an for the Winding -up of a company, its consequences date back to the commencement of winding up. The other consequences of winding up by the court are as follows:
Intimation to official liquidator and registrar (Sec. 444) Copy of Winding-up order to be filed with the registrar [Sec. 455 (1), (1-A) and (2) Order for Winding-up deemed to be notice of discharge [Sec. 455 (3)]. Suits Stayed [Sec. 446 (1)]. Powers of the court [Sec. 446 (2) and (3) ]. Effect of winding -up order [Sec. 447 ]. Official Liquidator to be liquidator [Sec. 449].

 An

administrator, called liquidator, is appointed and he takes control of the company, collects its assets, pays its depts. and finally distributed any surplus among the members in accordance with their rights.
appointer may also appoint one or more deputy or assistant liquidators to assist the liquidator in the discharge of his functions.

The

Liquidator has the following duties : To conduct proceedings in Winding-up. To make a report. To take custody of company's property. To comply with directions of the creditors or contributories or the committee of inspection. To summon meetings of creditors and contributories. To obtain directions from the tribunal. To keep statutory books. To get accounts audited. Central government 's control of liquidators. Information as to a pending Winding-up.

Exercisable with the sanction of the tribunal

To institute or defend any suit in the name and on behalf of the company. To carry on the business of the company. To sell the immovable /movable property of the company. To raise money on the security of the company. To do all such other things as may be necessary for the Winding -up of the company. To pay ,Compromise or settle with any class of creditors. To appoint advocate ,attorney. To compromise any call ,liability or debt.

Exercisable without the sanction of the tribunal.

Do all acts ,execute all deeds ,receipts and other documents. Inspect the records and returns of the company with the registrar. Claim in the insolvency of any contributory. Draw ,accept ,make any bill of exchange in the name of the company. Appoint any agent.

Voluntary winding up WITHOUT INTERVENTION OF THE COURT Members voluntary winding up Creditors voluntary winding up Voluntary winding up UNDER THE SUPERVISION OF THE COURT

The company may also be wound up without intervention of court. And it is called voluntary winding up. In other words, it means the winding up by the members and the creditors. It requires for procedures : By ordinary resolution:- Sometimes, company fixes the period for the duration of company, in such case it required ordinary resolution. By special resolution:- Company may, at any time, pass special resolution that company be wound up voluntary.

Members voluntary winding up:-

It is the winding up in the case of which a declaration of solvency is made and delivered to registrar.

Creditors voluntary winding up:-

In such case, winding up shall arise where the company is unable to pay its debts in full. They are given the powers to control and supervise the winding up process.

SI.NO.

Members voluntary Winding up

Creditors voluntary Winding up

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

Director's declaration of Solvency is a must

Meeting of members and passing a resolution is required No committee of Inspection Members have dominating control Members appoint the liquidator Liquidator exercises some of his powers with the sanction of a special resolution of members.

No such declaration is required.

No meeting of members is necessary. Such a committee may be constituted Creditors have dominating control. Creditors have choice over members. Sanction of the tribunal or the committee of inspection or of meeting of creditors

Effects of voluntary winding-up Voluntary Winding-up has the following effects : On status of Company Corporate powers to continue until dissolution Board's powers to cease on liquidator's appointment. Effect of company's employees. Avoidance of transfer of shares.

As a matter of fact, it is voluntary winding up but under the supervision of the court. At any time after a company has passed a resolution for voluntary winding up, the court may make an order that voluntary winding up shall continue but subject to the supervision of the court. The court may appoint liquidator, it may also remove any liquidator. It also has the advantages of compulsory winding up. Because the court gets all the powers which it can exercise in a compulsory winding up.