WINDING UP OF COMPANIES BY DR D SASIKALA

WINDING UP OF COMPANIES BY DR. D. SASIKALA ASSOCIATE PROFESSOR & HEAD DEPARTMENT OF CORPORATE SECRETARYSHIP HINDUSTHAN CAS COIMBATORE.

MEANING OF WINDING UP � Winding up of a company is the process through which life of a company comes to an end � An Administrator, called a liquidator is appointed and he takes control of the company � Liquidator collects its assets, pays its debts � and finally distributes any surplus among the members in accordance with their rights. � Once the w/up is completed, the company is completely dissolved and it ceases to exist.

PROCEDURE OF W/UPu/s 270 of Cos Act 2013 A company may be wound up in two ways: Ø W/up By the Tribunal Ø Voluntary Winding up ØMembers Voluntary w/up ØCreditors Voluntary w/up

WINDING UP BY THE TRIBUNAL u/s 271(1) As per Companies Act 2013, a company can be wound up by a Tribunal, if: • It is unable to pay its debts. • The company has by special resolution resolved that the company be wound up by the Tribunal. • It has acted against the interest of the sovereignty and integrity of India, the security of the State, friendly relations with foreign states, public order, decency or morality.

Contd. . � The Tribunal has ordered the winding up of the company under Chapter XIX. � If the company has not filed financial statements or annual returns for the preceding five consecutive financial years. � If the Tribunal is of the opinion that it is just and equitable that be company should be wound up. � If the affairs of the company have been conducted in a fraudulent manner � the company was formed for fraudulent and unlawful purposes or the persons concerned in the formation � management of its affairs have been guilty of fraud or misconduct.

PETITION & APPLICATION OF W/UP –u/s 272 �Petition for w/up may be presented by any on of the following persons: § The Company § Any Creditor or Creditors § Contingent creditor/Prospective creditor Any Contributory § The Registrar § Any person authorised by Central Govt. § By Central / State Govt. (If company is acting against the interest and integrity of India) §

Contingent Creditor& Prospective Creditor Contingent Creditor: �A person to whom a debt is owed, but payment of which is only due to the occurrence of a future event. Prospective Creditor: • A creditor to whom debt is due but not immediately payable.

Contributory �A person liable as member to the assets of the company in case of winding up. �A holder of a fully paid share of a company.

VOLUNTARY WINDING UP �In Voluntary w/up, the members and creditors of the company settle their affairs without going to court. �One or more Liquidators are appointed by the company in general meeting for the pupose of w/up. �A voluntary w/up commences from the date of passing of resolution for vol. w/up.

Circumstances of Vol. w/up �If the company passes a special resolution for winding up of the Company. �to be wound up voluntarily as a result of the expiry of the period of its duration fixed by its articles of association �on the occurrence of any event as per A/A.

Procedures involved in Vol w/up � Conduct a board meeting with 2 Directors and thereby pass a resolution with a declaration given by directors that they are of the opinion that company has no debt or it will be able to pay its debt after utilizing all the proceeds from sale of its assets. �Issues notices in writing for calling of a General Meeting proposing the resolution along with the explanatory statement.

CONTD. . �In General Meeting pass the ordinary resolution for the purpose of winding up by ordinary majority or special resolution by 3/4 th majority �Conduct a meeting of creditors after passing the resolution, if majority creditors are of the opinion that winding up of the company is beneficial for all parties then company can be wound up voluntarily. �Within 10 days of passing the resolution, file a notice with the registrar for appointment of liquidator.

CONTD. . �Within 14 days of passing such resolution, give a notice of the resolution in the official gazette and also advertise in a newspaper. �Within 30 days of General meeting, file certified copies of ordinary or special resolution passed in general meeting. �Wind up the affairs of the company and prepare the liquidators account and get the same audited. � Conduct a General Meeting of the company.

CONTD. . � In that General Meeting pass a special resolution for disposal of books and all necessary documents of the company, when the affairs of the company are totally wound up and it is about to dissolve. � Within 15 days of final General Meeting of the company, submit a copy of accounts and file an application to the tribunal for passing an order for dissolution. � If the tribunal is of the opinion that the accounts are in order and all the necessary compliances have been fulfilled, the tribunal shall pass an order for dissolving the company within 60 days of receiving such application.

CNTD. . �The appointed liquidator would then file a copy of order with the registrar. � After receiving the order passed by tribunal, the registrar then publish a notice in the official Gazette declaring that the company is dissolved.

Consequences of Winding up �Every transfer or alteration of status of a member after commencement of w/up is void. �Any transferof property made within one year of presentation of w/up petition is void unless ordered by the court. �On windimg up order, provisional manager ceases to hold office.

Changes in w/up after IBC 2016 � Sec 270, regarding modes of w/up has been deleted after the enforcement of Insolvency & Bankruptcy Code(IBC), and has been substituted by Winding up by Tribunal. � Sec 271, which deals with the circumstances of w/up by Tribunal has been sustituted. � Sec 275(2), which deals with company liquidator & his appointment, IBC deals with appointment of registered insolvency professionals under IBC, 2016.

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