Voluntary winding up

winding up of companies, voluntary winding, legal provisions, appointment of the liquidator, final meeting and dissolution of the company

1. Voluntary Winding up of companies ~ Keshav Garg

2. Voluntary Winding up Winding up by the creditors or members without any intervention of the Tribunal is termed as voluntary winding up. According to section 304, a company may be wound up voluntarily: 1. By passing an ordinary resolution in general meeting— ( a) When the period, for the duration of which the company was constituted, has expired, or ( b) When the event on the happening of which depended the termination of the existence of the company has happened. 2. By passing a special resolution to wind up voluntarily for any reason whatsoever.

3. Within fourteen days of the passing of the resolution, the company shall give notice of the resolution by advertisement in the Official Gazette Every officer responsible for default in publishing the resolution shall be punishable with fine extending up to Rs 5000 for every day of the default. (Section 307) Voluntary winding up of a company is of two kinds: ( a) Members’ voluntary winding up. Members’ voluntary winding up requires the filing of a statutory declaration of solvency by the majority of the directors of the company with the Registrar.

4. ( b) Creditors’ voluntary winding up. Where the company is not in a position to pay off its liabilities in full, the voluntary winding up is termed as the creditors’ voluntary winding up. In such a case declaration of solvency shall not be made and filed with the Registrar

5. Legal provisions of Voluntary winding Up Declaration of solvency. (Section 305) The declaration of solvency made by directors It states that company has no debts or it will be able to pay its debt Legal provisions related to declaration of solvency Sec305(1) Declaration of solvency shall be made by Directors at BOD meeting The director shall declare that they have enquired about the affairs of company found that it has no debt or payment of debt will made out of sale proceeds of assets It contains a declaration that the company is not being wound up to defraud any person(s).

6. It is made within 5 weeks preceding the date of passing resolution for the winding up of the company and delivered to the Registrar before that date. It is accompanied by a copy of the report of the auditors of the company on the profit and loss account and balance sheet of the company prepared up to the date of declaration It contains a statement of the company’s assets and liabilities as at the latest practicable date before the making of the declaration.

7. 2. Meeting of creditors Meeting of creditors is mandatory, in case of voluntary winding up It is to protect the interest of the creditors and to make them aware of the affairs of the company 3. Publication of Resolution for voluntary winding up (Sec 307) The resolution passed by company shall be published within 14 days of passing resolution in official gazette It should also be published in newspaper which is in circulation in the district of register or any other office

8. 4 . Commencement of winding up (Sec 308) A voluntary winding up shall be deemed to commence from the date of passing a resolution by the company for its voluntary winding up 5. Effect of voluntary Winding up On commencement of winding up company cease to carry on the business It may carry on its business where it is required for the beneficial winding up of the business Corporate status and powers of the company shall continue until it is dissolve

9. 6. Appointment of the liquidator (Sec- 310) Legal provisions related to appointment of the liquidator are:- Appointment of Company liquidator i ) Appoint by company in general meeting [Sec 310 (1)] Company liquidator is appointed from panel of professional prepared by the central government If creditors does not approve such appointment, then they shall appoint another liquidator ii) Appoint by the creditors [Sec 310(2)] The appointment of company liquidator shall be effective only if it is approved by majority of creditors If creditors does not approve such appointment, then they shall appoint another liquidator

10. 2. Declaration by the company liquidator [Sec 310(4)] Liquidator shall file declaration with the company and creditors within 7 days from the date of his appointment 3. Notice for appointment to registrar Notice of appointment of liquidator along with his name and particulars shall be given by company to registrar within 10 day of his appointment

11. 7. Board power ceases on the appointment of Company liquidator Power of managing director, whole time director and manager comes to end once liquidator is appointed 8. Appointment of committees (Sec 315) Appointment of committee shall be made by company and creditors It is done to supervise the liquidation process

12. 9. Winding up proceedings Liquidation proceedings are pursued by liquidator: Quarterly reports should be sent to members and creditors in prescribed manner (Sec 316) As soon as affairs of company are fully wound up company liquidator shall prepare reports of winding up and call a general meeting (Sec 317) 10. Final meeting and dissolution of the company(Sec 318) Legal provision related to this are given : Final meeting of the company: After preparing final report of winding about the settlement of assets and liabilities, final general meeting is called up and matter is discussed

13. 2. Submission of copies to registrar Within 2 weeks after final meeting , the copies of final winding up of accounts and copies of resolutions passed are to submitted to registrar 3. Dissolution of the company: on passing the resolution for dissolution of company, the company is finally dissolved on the order of tribunal Legal provision in this regard : Application to the Tribunal for dissolution: after passing resolution for dissolution, liquidator must file application before tribunal for dissolution of company Order of tribunal: if the tribunal is satisfied that process of winding up is just and fair, it shall pass the order of dissolution within 60 days of receipt of application

14. iii) Filing copy of order with registrar within 30 days iv) Publication by the registrar : on receiving the copy of dissolution order, registrar shall publish notice in official gazette that company is dissolved