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Winding Up & Dissolution
Wounding up is the process to bring an end to the life of the company, whereby all the affairs and operations of the company are closed. In case of winding up, an administrator, called the liquidator, is appointed and he takes control of the company, collects its assets, pays debts and finally distributes any surplus among the members in accordance with their rights. After completion of the process of winding up, the company is dissolved and its name is removed from the records of the Registrar of Companies. A company may be wound up voluntarily on its own or mandatorily by the High Court.
A company can be voluntarily wound-up:
- when the period, if any, fixed for the duration of the company by the articles has expired. or the event, if any, has occurred, on the occurrence of which the articles provide that the company is to be dissolved, and the company in general meeting passes a resolution requiring the company to be wound up voluntarily;
- if the company passes a special resolution that the company be wound up voluntarily.
A company instead of managing the whole winding up process on its , can resolve in the special resolution passed at the meeting of shareholders , for winding up by Court , in which the winding up affairs shall be administered by the High Court.
Process of voluntary winding up:
As per the provisions of the Companies Act 1956 dealing with voluntary wounding up , the following procedure shall be adopted:
- Approval of Board of Directors:
The Board of Directors shall approve the proposal to wound up the affairs of the Company and shall call a meeting of the shareholders.
- Approval of Shareholders:
The proposal to wound up and appointment of liquidator shall be approved by ordinary resolution of the shareholders, where the wound up is due to expiry of term or occurrence of some specified event, in other case, it shall be approved by a special resolution.
- Publication of Resolution:
The resolution passed for winding up shall be published in the official gazattee and in some newspaper circulating in the district in which the registered office of the Company is situated, within 14 days of passing the resolution.
- Appointment of Liquidator:
After passing of special resolution, the company shall appoint the liquidator, on his appointment all the power of Board of Directors shall cease.
- Declaration of Solvency:
The majority of Directors shall make a declaration of the effect, that they had made a full enquiry into the affairs of the Company and that having done so, they have formed an opnion that the company has no debts or that it will be able to pay the debts in full within with such period not exceeding three years from the commencement of the winding up. The declaration shall be made within five weeks preceding the date of passing of resolution for winding up and shall be supported by report of the auditors of the company.
- Discharge of Debts:
The liquidator shall discharge the debts and dues of the company in accordance with provisions of the Companies Act.
- Meeting of Creditors:
In case the liquidator is at any point of time is of the opnion that company will not be able to pay off its debt in full within 3 years of commencement of winding up or period has expired without the payment of debt , than the liquidator should call a meeting of the creditors and lay before them a statement of assets and liabilities of the Company.
- General Meeting:
The Liquidator shall call general meeting at end of first year of commencement of winding up and every year thereafter, within 3m months from end of year and lay down before the meeting, account of his acts and dealing and of the conduct of the winding up during the preceding year.
- Final meeting:
After completely winding up the affairs of the company, the liquidator shall call a final meeting by advertisement and lay down the accounts showing how the affairs have been windup and property has been disposed off and shall send a notice after the meeting to Registrar of Companies and Official Liquidator along with copy of account
- Report by Official Liquidator:
If official liquidator is satisfied that affairs of the company has been properly, he shall forward the report to the High Court recommending the winding up of the company.
- Final Order by High Court:
On receipt of report of official liquidator, the High Court after such further investigation as he deems fit, order the winding up of the company
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