Winding up of companies BY DR VIJAY OAK

Winding up of companies BY : DR. VIJAY OAK

Meaning When the company’s life is brought to an end and its assets are administered by the liquidtor for the benefit of creditors & members, it is called winding up. Winding up preceds dissolution of company. Winding up is of two types namely, compulsory winding up and voluntary winding up.

Compulsory winding up It is also known as winding up by tribunal Section 271 deals with compulsory winding up. There are total 7 broad grounds for compulsory winding up: Inability to pay debts Special resolution Acts against Sovergnity Sick company Fraudulent conduct of business Default in financial statements Just & equitable

When its just & equitable: Deadlock in management Loss of substratum Losses Oppression of minority

Who can apply for compulsory winding up (S. 272) Company Creditors Contributories Registrar of companies (ROC) Central govt. State govt.

Powers & duties of Liquidator in cwu (S. 290) To carry on company’s business for beneficial winding up To execute necessary deeds in company’s name To sell movable & immoveable properties of co. To sell company’s undertaking To institute or defend any suit/legal proceeding To invite claims from creditors To inspect record & returns with ROC To draw/accept any negotiable instruments for co.

Case Law Yenidje Tobacco Co. Ltd. Re(1916). , two directors of company W & R were not talking with each other except through secretary. Hence there was a complete deadlock in management. It was held that under these circumstances it is just and equitable to pass winding up order. In Chua Kien How vs. Goodwealth Trading Pvt. Ltd. (1993) 1 SCR 486 the two directors couldn’t agree with each other and there was a dispute as to who is actually the majority shareholder between them. It led to deadlock in management. In German Date Coffee Co. Re (1882) LR 20 Ch. D. 169, a company was formed to manufacture coffee from dates bg using the German patent. But as the process patent wasn’t granted, the company lost its substratum. So winding up order was passed by the court.

Voluntary Winding up It may be classified as Members’ voluntary winding up and creditors’ voluntary winding up. A company may be wound up voluntarily on the basis of an ordinary resolution or special resolution to that effect Under 2013 Companies Act creditors may convert their winding up of compang into winding up by tribunal. Declaration of solvency & meeting of creditors or members as the case may be are the prerequisites of voluntary winding up.

Reference Books Avtar Singh, Company Law 16 th edn. Eastern Book co. (2015) Bare Act