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Published : June 10, 2016 | Author : Deepti Bajpai
Category : Company Law | Total Views : 664 | Unrated

Deepti Bajpai
Currently pursuing, BA, LLB (Hons), IV Year, Dr. Ram Manohar Lohiya National Law University, Lucknow

Voluntary winding-up of the Company by Members

A company may, voluntary wind up its affairs, if it is unable to carry on its business, or if it was formed only for a limited purpose, or if it is unable to meet its financial obligation, and etc. A company may voluntary wind up itself, under any of the two modes:
a. Members voluntarily winding up.
b. Creditors voluntarily winding up.
The article discusses the procedure for Voluntary winding-up of the Company by Members

A. Board Meeting

a. Declaration of Solvency In Case of Proposal To Wind Up Voluntarily
The directors may, at a meeting of the Board, make a declaration verified by an affidavit, to the effect that they have made a full inquiry into the affairs of the company, and that, having done so, they have formed the opinion that the company has no debts, or that it will be able to pay its debts in full within such period not exceeding three years from the commencement of the winding up as may be specified in the declaration.

b. Time limit
The declaration is to be made within the five weeks immediately preceding the date of the passing of the resolution for winding up the company (mentioned below) and is delivered to the Registrar (ROC) for registration before that date.

c. Profit and Loss Account and Balance sheet
It is accompanied by a copy of the report of the auditors of the company on the profit and loss account of the company for the period commencing from the date up to which the last such account was prepared and ending with the latest practicable date immediately before the making of the declaration and the balance sheet of the company made out as on the last-mentioned date and also embodies a statement of the company's assets and liabilities as at that date.

B. Resolution

The company shall issue notices in writing calling for the General Meeting of the company proposing the resolutions, with suitable explanatory statement. In the general meeting, winding-up can be initiated:

a. Through a resolution in general meeting on expiry of fixed period or occurrence of event:
b. Through a special resolution for winding up of a company voluntarily.
The process of winding shall commence from the time when the resolution is passed. The same is to be filed with ROC within thirty days.
The company shall cease to carry on its business, except so far as may be required for the beneficial winding up of such business. However, the corporate state and corporate powers of the company shall continue to till it is dissolved.

C. Publication Of Resolution To Wind Up Voluntarily

The company shall within fourteen days of the passing of the resolution, give notice of the resolution by advertisement in the Official Gazette, and also in some newspaper circulating in the district where the registered office of the company is situate.

D. Appointment Of A Liquidator

The company in general meeting shall appoint one or more liquidators and fix the remuneration. Notice of appointment of liquidator has to be given to ROC within ten days of the event to which it relates.

E. Creditors Meeting

On the same day or the next day of passing of resolution of winding up of the Company, conduct a meeting of the Creditors. If two thirds in value of creditors of the company are of the opinion that it is in the interest of all parties to wind up the company, then the company can be wound up voluntarily. If the company cannot meet all its liabilities on winding up, then the Company must be wound up by a Tribunal. Notice of any resolution passed at a creditors' meeting shall be given by the company to the ROC within ten days of the passing thereof.

F. Liquidator To Call Creditors' Meeting In Case Of Insolvency

If liquidator is of the opinion that the company will not be able to pay its debts in full within the period stated in the declaration, or that period has expired without the debts having been paid in full, he shall call a meeting of the creditors, and shall lay before the meeting a statement of the assets and liabilities of the company.

G. Final Meeting And Dissolution

As soon as the affairs of the company are fully wound up, the liquidator shall make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of; and call a general meeting of the company for the purpose of laying the account before it, and giving any explanation thereof.

The meeting shall be called by advertisement specifying the time, place and object of the meeting and published not less than one month before the meeting in the Official Gazette, and also in some newspaper circulating in the district where the registered office of the company is situate.

Within one week after the meeting, the liquidator shall send to the ROC and Official Liquidator (OL) copy each of the account and shall make a return to each of them of the holding of the meeting and of the date thereof.
The ROC on receiving the account and either the return or the return shall register them. The OL on receiving the account and the return would make a scrutiny of the books and papers of the Company to ascertain as to whether the affairs of the Company has not been carried on in a manner prejudicial to the interest of its members or public, and makes a report to the concerned Tribunal. If the Tribunal is satisfied with the report of the OL, Tribunal may pass an order under which the company is deemed to be dissolved.

The Company shall then file the dissolution order with the ROC and the ROC shall then publish it in the Official Gazette.

[1] Section 488 of the Companies Act, 1956
[2] Section 484(1) of the Companies Act, 1956
[3] Section 486 of the Companies Act, 1956
[4] Section 487 of the Companies Act, 1956
[5] Section 485 of the Companies Act, 1956
[6] Section 490 of the Companies Act, 1956
[7] Section 493 of the Companies Act, 1956
[8] Section 500, 501 of the Companies Act, 1956
[9] Section 495 of the Companies Act, 1956
[10] Section 497 of the Companies Act, 1956
[11] Section 497 of the Companies Act, 1956
[12] Section 445 of the Companies Act, 1956

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