Scribd
Upload
53 views2 pages

Winding Up 1

The document discusses the winding up process of a company. It explains that winding up ends a company's existence by having a liquidator take control of assets, pay debts, and distribute any surplus to members. There are three modes of winding up: compulsory by court order; voluntary without court intervention; and voluntary with court supervision. The grounds for compulsory winding up by court order include a shareholder resolution, failure to hold required meetings, not commencing business within a year, having fewer than the minimum number of members, and inability to pay debts. The document also discusses when winding up would be considered "just and equitable" by a court.

Uploaded by

AR James
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
53 views2 pages

Winding Up 1

The document discusses the winding up process of a company. It explains that winding up ends a company's existence by having a liquidator take control of assets, pay debts, and distribute any surplus to members. There are three modes of winding up: compulsory by court order; voluntary without court intervention; and voluntary with court supervision. The grounds for compulsory winding up by court order include a shareholder resolution, failure to hold required meetings, not commencing business within a year, having fewer than the minimum number of members, and inability to pay debts. The document also discusses when winding up would be considered "just and equitable" by a court.

Uploaded by

AR James
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 2

1

WINDING UP

Winding up of a company is a process whereby its life is ended and its property administered for
the benefit of its creditors and members. An administrator called a liquidator is appointed and he
takes control of the company, collects its assets pays its debts and finally distributes any surplus
among the members in accordance with their rights.”1 In the course of winding up the assets of
the company are realized by converting them in to money and the same is then applied for the
satisfaction of its debt, and balance being returned to the share-holders.

The modes of winding up may be discussed under the following three heads, namely: -
1. compulsory winding up by the court
2. Voluntary winding up without the intervention of the court
3. ‘Voluntary winding up with the intervention of the court

A company may go into liquidation not only when it becomes insolvent but also when the
shareholders think that it will not be profitable to continue the business in the way in which it
had been done. The shareholders do not get anything until the creditors are fully paid. According
the Companies Act 1994 a company may be wound up either by the court, or voluntarily or
subject to the supervision of the court. A voluntary winding up may be by the members or by the
creditors.

Explain the grounds on which the court would consider it just and equitable to wind up
company?

There are three modes of winding up a company:


1. Compulsory winding up by the Court;
2. Voluntary winding up; and
3. Voluntary winding up under the supervision of the Court.

COMPULSORY WINDING UP:

Compulsory winding up takes place when a company is directed to be wound up by an order of


Court. The circumstances or grounds upon which a company may be wound up by the Court are
contained in section 241 of the companies Act which are as follows-

1. Special Resolution of the Company: If a company, by special resolution, resolve that it may
be wound up by the Court, the Court may pass a winding up orders. The power of the Court
in. such a case is discretionary and should be exercised only where a bonafide case is made
out. Court may, however, refuse to order Winding up where it is opposed to public interest or
interests of the company.

2. Default in holding regular meeting: If a company makes a default in delivering the-


statutory report to the Registrar or in holding the statutory meeting, the Court may order
winding up of the company either on the petition of the Registrar or on the petition of
contributory.) The petition for wind up must not be filed before the expiration of the 14 days

1
Professor Gower, The Principles of Modern Company Law, 647(3rd ed. 1969)
2

after the last day on which the statutory meeting ought to have been held. However, the
Court, instead of making a winding up order, and direct that the statutory report shall be
delivered or that a meeting shall be held. If the company fails to comply with the order then
the Court will wind up the company.

3. Failure to commence or suspension of business: Where a company does not commence its
business within a year from its incorporation or suspends its business within for a whole, the
Court may order for its winding up. This is discretionary with the Court. The Court will not
exercise his power unless there are clear indications that the company has no intention of
continuing business. Where the suspension of business is temporary or can be satisfactory;
accounted for, the court will refuse to make order.

4. Reduction of Members: Where the number of members is reduced below 7 in case of public
company and below 2 in case of a private company the court may order of winding up the
company.

5. Liability to pay debts: The court may order for winding up of a company if it is unable to
pay its debts. The basis of an order for winding up under this clause is that the company has
closed to be commercial solvent i.e. it is unable to meet its current demands.

6. Just and equitable: In the following cases the courts have declined to make a winding up
order on just and equitable grounds: -
a. Where there were quarrels and grouping among shareholders.
b. Where the company was running at a loss.
c. Where the petitioner has an alternative remedy.
d. Where there are allegations of mismanagement or misappropriation of funds by directors
and nothing more.
e. Where the business of a company was temporally suspended owing to trade depression
and was intended to be continued when conditions improved.
7. Contributories: The term contributory is defined in section 237 which means every person
liable to contribute to the assets of a company in the event of its being wound up. The
liability of the contributory is to pay a debt at the time specified in the calls made on him by
the liquidator. No claim founded on the liability of a contributory shall be cognizable by any
Court of Small Causes.

If any member dies either before or after his name is placed in the list of contributories then his
legal representatives and his heirs shall be liable in the due course. If the representatives or heirs
fail to pay the money then his liability shall be paid off, from his movable or immovable
property. For the purpose of this section coparceners of a Joint Hindu family of a contributory is
also included as legal representatives. If the member becomes insolvent his assignees shall
represent him or otherwise the money shall be paid out from his assets.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy