WINDING UP
Winding up of a company is the process where by its life is ended and its property administered for the benefit of its creditors and members. An administrator called a `liquidator` is appointed and he takes control of the company, collects its assets pays its debts and finally distributes any surplus among the members in accordance with their respective rights.
MODES OF WINDING UP
· A company may be wound up in any one of the following three ways: -
1. Compulsory winding up - by tribunal
Grounds for compulsory winding up [Section 433]
(a) if the company has, by a special resolution resolved that the company be wound by Tribunal;
(b) if default is made in delivering the Statutory Report to ROC or holding the Statutory meeting;
(c) if the company does not commence its business within a year from the incorporation or suspends its business for a whole year.;
(d) If the number of members is reduced below 7 in the case of a public company and 2 in the case of a private company;
(e) If the company is unable to pay its debts;
(f) If the Tribunal is of opinion that it is just and equitable that the company should be wound up;
(g) If the company has made a default in filing with ROC its Annual Report or Annual Return for any 5 consecutive financial years;
(h) If the company has acted against the interests of sovereignty and integrity of India, the security of the state, friendly relations with foreign States, public order, decency or morality;
(i) If the Tribunal is of the opinion that the company being a sick company and is unlikely to become viable.
Who may petition
· A petition for the compulsory winding up of a company may be presented by any of the following:-
1. the company;
2. any creditor (s);
3. a contributory or contributories
4. combination of creditors and contributories
5. the ROC
6. any person authorized by Central Government pursuant to investigation
7. the official liquidator
8. the Central Government
2. Voluntary winding up - by shareholders resolution
· In this type of winding up, the company and its creditors are left free to settle their affairs without going to the Tribunal. They however apply to the Tribunal for directions.
Grounds for voluntary winding up
Ø the shareholders of the company pass an ordinary resolution for winding up where the duration and the purpose of incorporation of the company has been fixed by the Articles .
3. Supervision of Tribunal – a winding, which the Tribunal wants to continue under its supervision
Grounds for winding up under supervision of the Tribunal
Ø At any time after a company has passed a resolution for voluntary winding by any creditor or contributory makes an application to the Tribunal that the winding up may be continued under the supervision of the Tribunal; and
Ø the court makes an order that the voluntary winding up should continue under the supervision of the Tribunal.
CONSEQUENCES OF WINDING UP ORDER
Following are the consequences of the winding up order of the Tribunal: -
1. an intimation of the winding up order shall be sent to the Official Liquidator and the ROC.
2. the petitioner (creditor or contributor) and the company shall file with ROC within 30 days a certified copy of the winding up order .
3. winding up order is deemed notice of discharge of the officers and employees of the company (except when the business is continued)
4. all actions and suits against the company are stayed
5. any suit or proceeding pending in any other Court shall be transferred to the Tribunal
6. the winding operates in the interests of all the creditors and all the contributories, no matter who in asked for it.
7. the official liquidator becomes the liquidator of the company and takes possession and control of the assets of the company
8. all the powers of the Board of Directors cease and the same are then exercisable by the liquidator.
9. on the commencement of the winding up the limitation remains suspended in favour of the company till one year after the winding order is made.
· Following transactions shall be void except with the leave of the Tribunal
1. any disposition of the property of the company and any transfer of shares in the company or alteration in the status of the company
2. any attachment, distress or execution to be enforced against the assets or effects of the company except statutory dues;
3. any sale of any of the properties of the company
4. any charge created within previous 12 months.
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