Modes of Winding Up

Winding Up 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, pays its debts and finally distributes any surplus among the members in accordance with their rights Professor. Gower Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

Modes of Winding Up Winding up by the Court (Compulsory Winding Up) Voluntary Winding Up Member’s Voluntary Winding Up Creditor’s Voluntary Winding Up Winding Up subject to the supervision of the Court. Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

Winding Up by the Court Special Resolution of the Company Default in holding statutory meeting Failure to commence business Reduction in Membership Inability to pay its debts Demand for payment neglected Decreed debt unsatisfied Commercial Insolvency Just and Equitable Substratum of the Company is gone Majority of the shareholders using the powers unfairly Deadlock in the management to achieve the objectives Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

Petition for Winding Up By the Company By the Creditors Debentures Holders Central or state Government whom any tax charge is due. Person who has monetary claim against the company By any Contributory or Contributors Membership is reduced below the statutory minimum Original Allottee of shares Held the company shares for at least 6 months during the 18 months immediately before the commencement of winding up. Shares have transferred through the death of a former holder. By the Registrar By any person authorized by the Central Government Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

Content of the Petition Name of the Company with the date of its Incorporation Address of the Registered Office Amount of Paid – Up Capital Statement of facts to justify a winding Up order. Request to the Court to issue an order of winding up Statement in the form of an affidavit that the facts stated in the petition are correct and true. Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

Procedures for Winding Up Commencement of Winding Up Advertisement of Petition Power of Court to stay or restrain proceedings against company Intimation to Liquidator or Registrar Copy of Winding up order to be filled with the Registrar Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

Consequences of Winding Up Order for winding up deemed to be notice of discharge Suits Stayed Powers of the Court Effect of Winding Up Official Liquidator to be liquidator Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

Liquidator Liquidator is a person who helps the court to complete the liquidation proceedings. An official liquidator may be appointed from a panel of professional firms of CA, Advocates, Company Secretaries etc., which the Central Government shall constitute for the court; or may be a body corporate consisting of such professionals as may be approved by the central government from time to time; or may be a whole time or part time officer appointed by the central government. Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

Duties of Liquidator Proceedings in Winding Up Report Custody of Company’s Property Control of Powers Meetings of Creditors and Contributors Directions from the Court Proper Books Audit of Accounts Appointment of Committee of Inspection Pending Liquidation Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

Powers of Official Liquidator To defend any suit, civil or criminal proceedings in the name and on behalf of the company. To carry on the business of the company so far as may be necessary for the beneficial winding up of the company. To sell movable or immovable property of the company – wholly or in parcels either privately or through public action. To raise money on the security of the assets of the company. To do all things as may be necessary for the winding up of the affairs of the company and distributing its assets. Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

Other Powers…. Execute all deeds, Receipts and other documents in the name and on behalf of the company under company’s seal. Prove, rank and claim the insolvency of a contributory. Draw, accept, make and endorse any bill of exchange or promissory note in the name and on behalf of the company. Appoint an agent to do any business which the liquidator is unable to do himself, etc. Appoint Security guards, Valuer, CA etc. Publish an advertisement inviting bids for sale of the assets of the company etc. Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

General Powers of the Court Stay of Winding Up of the Company Settlement of list of contributories Delivery of Property Summoning of Persons suspected of having property of the company Exclusion of Creditors Order as to Costs Arrest of Absconding Contributory Meetings of Creditors or contributories Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

Voluntarily Winding Up Voluntarily winding up means winding up by the members or creditors of a company without interferences by the Court. The main objectives of this winding up is to settle their affairs without going to the Court of Law. The company may wound up voluntarily on two ways; By Passing an Ordinary Resolution By Passing an Special Resolution Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

Provisions Applicable for MVWU Appointment of Liquidators Board’s powers to cease on appointment of a liquidator Powers to fill vacancy in office of liquidator Notice of appointment of liquidator to be given to Registrar Power of Liquidator to accept shares etc. Duty of liquidator to call creditors meeting in case of insolvency Duty to call General Meeting at the end of the year Final Meeting and Dissolution – Penalty Rs. 1,000 Provisions as to Annual & Final Meeting in case of Insolvency. Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

Duties of Secretary in MVWU Arrange the Board Meeting, within 5 weeks immediately preceding the date of passing the resolution for MVWU. Arranging & Preparing P&L Account, B/S & Audited Report and ending with the latest practicable date before the date of declaration Prepare declaration of Solvency, get it verified by affidavit before the Magistrate & file with the Registrar with all reports. Prepare & Issue of notice of the meeting to members & to check special resolution passed, appointment & remuneration fixed in the meeting. Check the Official Gazette and newspapers within 14 days after passing resolution Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

Continued….. Notice of appointment of liquidator is filed with registrar with 10 days of passing resolution. Check the special resolution for winding up is filed with the Registrar within 30 days of the meeting. Check every invoice, order and business letter issued by the company during the period contains a statement that company is being wound up Check all the Books, Documents, Movables & Immovable properties of the company are delivered to the liquidator, for public examination and give evidence as required. Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

Creditors Voluntarily Winding Up (CVWU) Meeting of Creditors – 2 Newspapers Resolution Notice given to Registrar – 10 Days & Rs. 500 Appointment of Liquidator Committee Appointment Inspection – Not more than 5 Persons Liquidator Remuneration Board’s Powers to cease an appointment of Liquidator Powers to fill vacancy in office of liquidator Duty of Liquidator to call meeting of company & Creditors at the end of each year Final Meeting & Dissolution Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

WU- Subject to Supervision of Court WU of a company subject to the supervision of the court presupposes a voluntary winding up of the Company At any time after a company passed a 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 give such liberty to creditors, contributors or others to apply to as it thinks. Petition for the continuance of a voluntary winding up subject to the supervision of the Court is deemed to be a petition for winding up by the Court. Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

Consequences of Winding Up Consequence as to shareholders Consequence as to Creditors Consequence as to Servants & Officers Consequence as to Proceedings against the Company Consequence as to Costs Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018

All the Best for Ur End Semester Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 8/29/2018