UNIT 5 WINDING UP OF COMAPNY
Modes Of Winding Up- Winding Up By The Court- Voluntary Winding Up- Types-
Members Voluntary Winding Up- Creditors Voluntary Winding Up- National
Company Law Appellate Tribunal.
WINDING UP OF THE COMPANIES
MEANING
Winding up of a company is a process of putting to an end to the life of a company. It is a proceeding
by means of which a company is dissolved and in the course of such dissolution its assets are
collected, its members, if necessary pay off its debts out of assets of the company or from
contribution. If any surplus is left, it is distributed among the members in accordance with their
rights.
DEFINITION
According to Prof. Gower, winding up of a company is the process whereby its life is ended and
its property administered for the benefit of its creditors and members. An administrator, called
liquidator, is appointed and he takes control of the company, collects its assets, pay its debts and
finally distributes any surplus among the members in accordance with their rights.
MODES OF WINDING UP
I. COMPULSORY WINDING UP BY THE COURT
A company may be wound up by an order of the court. This is called compulsory winding up.
Sec.433 lays down the following grounds for the winding up of a company bythe court;
1. If the company has by a special resolution resolved that it may be wound up by the court.
2. If the company makes a default in delivering the statutory report to the registrar or in holding
the statutory meeting, the court may order winding up of the company either on the petition of the
registrar or on the petition of the contributory
3. Where a company does not commence its business within a year from its incorporation, or
suspends its business for a whole year, the court may order for its winding up.
4. Where the number of members is reduced below 7 in the case of a public company and below 2
in case of a private company, the court may order the winding up of the company.
, 5. The court may order for the winding up of a company if it is unable to pay its debts.
6. The last ground on which the court can order the winding up of a company is when the court is
of the opinion that is just and equitable that the company should be wound up.
Petition for winding up
The following persons can file a petition
1. The company
2. Any creditors or creditor including any contingent prospective creditor or creditors
3. Any contributory or contributories
4. All or any of the aforesaid parties, together or separately
5. The Registrar
6. Any person authorized by the Central Government under section 243
II. VOLUNTARY WINDING UP
The object of a voluntary winding up is that the company and its creditors are left to settle their
affairs without going to the court, but they may apply to the court for any directions or orders if
and when necessary. This form of winding up is by far the most common and the most popular
form.
TYPES OF VOLUNTARY WINDING UP
i. Members voluntary winding up
Section 488 provides that where it is proposed to wind up a company voluntarily, the directors or
a majority of them, may, at a meeting of the Board, make a declaration verified by an affidavit
that the company has no debts or that it will be able to pay its debts in full within a period not
exceeding 3 years from the commencement of winding up as may be specified in the declaration.
Where such a declaration is duly made and delivered, the winding up following shall be called
members voluntary winding up.
ii. Creditors Voluntary winding up
Where the declaration of solvency is not made the winding up is referred to as creditors’ voluntary
winding up. The provisions for creditors’ voluntary winding up are similar to those applicable to
the members’ voluntary winding up except that in the former, it is the creditors who appoint the
liquidator, fix the remuneration and generally conduct the winding up.
Modes Of Winding Up- Winding Up By The Court- Voluntary Winding Up- Types-
Members Voluntary Winding Up- Creditors Voluntary Winding Up- National
Company Law Appellate Tribunal.
WINDING UP OF THE COMPANIES
MEANING
Winding up of a company is a process of putting to an end to the life of a company. It is a proceeding
by means of which a company is dissolved and in the course of such dissolution its assets are
collected, its members, if necessary pay off its debts out of assets of the company or from
contribution. If any surplus is left, it is distributed among the members in accordance with their
rights.
DEFINITION
According to Prof. Gower, winding up of a company is the process whereby its life is ended and
its property administered for the benefit of its creditors and members. An administrator, called
liquidator, is appointed and he takes control of the company, collects its assets, pay its debts and
finally distributes any surplus among the members in accordance with their rights.
MODES OF WINDING UP
I. COMPULSORY WINDING UP BY THE COURT
A company may be wound up by an order of the court. This is called compulsory winding up.
Sec.433 lays down the following grounds for the winding up of a company bythe court;
1. If the company has by a special resolution resolved that it may be wound up by the court.
2. If the company makes a default in delivering the statutory report to the registrar or in holding
the statutory meeting, the court may order winding up of the company either on the petition of the
registrar or on the petition of the contributory
3. Where a company does not commence its business within a year from its incorporation, or
suspends its business for a whole year, the court may order for its winding up.
4. Where the number of members is reduced below 7 in the case of a public company and below 2
in case of a private company, the court may order the winding up of the company.
, 5. The court may order for the winding up of a company if it is unable to pay its debts.
6. The last ground on which the court can order the winding up of a company is when the court is
of the opinion that is just and equitable that the company should be wound up.
Petition for winding up
The following persons can file a petition
1. The company
2. Any creditors or creditor including any contingent prospective creditor or creditors
3. Any contributory or contributories
4. All or any of the aforesaid parties, together or separately
5. The Registrar
6. Any person authorized by the Central Government under section 243
II. VOLUNTARY WINDING UP
The object of a voluntary winding up is that the company and its creditors are left to settle their
affairs without going to the court, but they may apply to the court for any directions or orders if
and when necessary. This form of winding up is by far the most common and the most popular
form.
TYPES OF VOLUNTARY WINDING UP
i. Members voluntary winding up
Section 488 provides that where it is proposed to wind up a company voluntarily, the directors or
a majority of them, may, at a meeting of the Board, make a declaration verified by an affidavit
that the company has no debts or that it will be able to pay its debts in full within a period not
exceeding 3 years from the commencement of winding up as may be specified in the declaration.
Where such a declaration is duly made and delivered, the winding up following shall be called
members voluntary winding up.
ii. Creditors Voluntary winding up
Where the declaration of solvency is not made the winding up is referred to as creditors’ voluntary
winding up. The provisions for creditors’ voluntary winding up are similar to those applicable to
the members’ voluntary winding up except that in the former, it is the creditors who appoint the
liquidator, fix the remuneration and generally conduct the winding up.
