TMI BlogCORPORATE RESTRUCTURING - WINDING UPX X X X Extracts X X X X X X X X Extracts X X X X ..... may be wound up even when it is perfectly solvent. A company can never be declared bankrupt although it is unable to pay its debts. It can only be wound up. Winding up and Dissolution The entire procedure for bringing about a lawful end to the life of a company is divided into two stages winding up and dissolution . Winding up is the first stage in the process whereby assets are released, liabilities are paid off and the surplus, if any distributed among its members. Dissolution is the final stage whereby the existence of the company is withdrawn by the law. Winding up in all cases does not culminate in dissolution. Even after paying all the creditors there may still be a surplus, company may earn profits during the course of beneficial winding up, there may be a scheme of compromise with creditors while company is in winding up and in all such events the company will in all probability come out of winding up and hand over back to shareholders/ old management. Dissolution is an act which puts an end to the life of the company. As such winding up is only a process while the dissolution puts an end to the existence of the company. Who may m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the company. Where the main object of the company for which it was incorporated has been completely achieved. Where there is complete deadlock in the management. When there is a bubble and has no business to carry on Where the company is insolvent and its business is being carried on for the benefit of the debenture holders. Where there has been Mis - management and misapplication of funds Where the petitioner was excluded from all participation in the business of a private company. (g) if the company has made a default in filing with the Registrar its balance sheet and profit and loss account or annual return for any five consecutive financial years (h) if the company has acted against the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality (i) if the Tribunal is of the opinion that the company should be wound up under the circumstances specified in section 424G i.e. Winding up of sick industrial company 2. Voluntary Winding up In voluntary winding up the company and its creditors are left to settle their affairs with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 500 , 501 , 502 , 503 , 504 , 505 , 506 , 507 , 508 and 509 of Companies Act applies to Creditors Voluntary finding up. Provisions applicable to every type of Voluntary Winding up The provisions applicable to every type of voluntary winding up are comprehensively stated in Section 511 , 512 , 513, 514 , 515 , 516 , 517 , 518 , 519 , 520 , 521 of Companies Act and these apply to every type of volunatry winding up whether it be a members' or a cerditors winding up. Consequences of Winding up Order - Order for winding up to be communicated to Official Liquidator and Registrar Where the Tribunal makes an order for the winding up of the company, the Tribunal, shall within a period not exceeding two weeks from the date of passing of the order, cause intimation thereof to be sent to the Official Liquidator and the Registrar. On the making of a winding up order, it shall be the duty of the petitioner in the winding up proceedings and of the company to file with the Registrar a certified copy of the order, within thirty days from the date of the making of the order. When a winding up order has been made or the Official Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holder of any shares which are fully paid up and for the purposes of all proceedings for determining, and all proceedings prior to the final determination of, the persons who are to be deemed contributories, includes any person alleged to be a contributory. Contributories in case of winding up of a body corporate which is a member As per Section 432 of the Companies Act if a body corporate which is a contributory is ordered to be wound up, either before or after it has been placed on the list of contributories - (a) the liquidator of the body corporate shall represent it for all the purposes of the winding up of the company and shall be a contributory accordingly, and may be called on to admit to proof against the assets of the body corporate, or otherwise to allow to be paid out of its assets in due course of law, any money due from the body corporate in respect of its liability to contribute to the assets of the company; and (b) there may be proved against the assets of the body corporate the estimated value of its liability to future calls as well as calls already made. Liability as contributories of present and past members In the event of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets of the company in the event of its being wound up, to contribute to the extent of any sums unpaid on any shares held by him as if the company were a company limited by shares. Provisions of Overriding preferential payments Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company, (a) workmen's dues; and (b) debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of section 529 pari passu with such dues, shall be paid in priority to all other debts. (2) The debts payable under clause (a) and clause (b) above shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions. Section 530 of the Companies Act provides for list of debts to be paid in priority to all other debts that in winding up subject to provisions of Overriding preferential payments as discussed above. Provisions of Liability for fraudulent conduct of business in the course of the winding up of a company Section 542 If in the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation - (a) in the case of a winding up by the Tribunal, in Tribunal; and] (b) in the case of a voluntary winding up, with the Registrar: Provided that no such audit as is referred to in this sub-section shall be necessary where the provisions of section 462 apply. When the statement is filed in Tribunal, a copy shall simultaneously be filed with the Registrar and shall be kept by him along with the other records of the company. Meetings to ascertain wishes of creditors or contributories In all matters relating to the winding up of a company, the Tribunal] may- (a) have regard to the wishes of creditors or contributories of the company, as proved to it by any sufficient evidence (b) if it thinks fit for the purpose of ascertaining those wishes, direct meetings of the creditors or contributories to be called, held and conducted in such manner as the 2[Tribunal] directs and (c) appoint a person to act as chairman of any such meeting and to report the result thereof to the Tribunal. (2) When ascertaining the wishes of creditors, regard shall be had to the value of each creditor's debt. (3) When ascertai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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