Winding up

Group F1
Winding Up- Introduction
 According to Prof. Gower :

“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 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.”
Modes of Winding up
 Winding up by the court
 Voluntary winding up
o Members voluntary winding up
o Creditors voluntary winding up
 Winding up subject to supervision of court


Application to the court for the winding up of
the company is made by petition
Winding up by the court
 Grounds for Compulsory Winding up:
1.Special resolution of the company
2.Default in delivering the statutory report to the
registrar or in holding statutory meeting
3.Failure to commence or suspension of business
4.Reduction in membership
5.Inability to pay its debts
6.Just and equitable
Just and equitable

 When the substratum of a company
disappears(Case : Pirie v. Stewart)
 Minority is disregarded or oppressed
 Deadlock in the company management

(Case :Yenidje Tobacco Co. Ltd 1916)
 Public interest is likely to be prejudiced
 Fraudulent or illegal object of company
 Company has no property and no business

Commencement of Winding up
 Winding up is said to be commenced from
o Date of the resolution
o Date of presentation of petition

 Petitionfor winding up is advertised 14 days
before the hearing, stating the date when
the petition was presented and the names
and addresses of the petitioner

Powers of Court
On hearing a winding up petition the court may-


 Dismiss it, with or without costs or

 Adjourn the hearing conditionally or
unconditionally
 Make an interim order
 Make an order for winding up the company
with or without costs or any other order as it
thinks fit
Consequences of winding up
 Intimation to official liquidator and registrar
 Copy of winding up order to be filed with the
registrar
 Order for winding up deemed to be notice of
discharge
 Suits stayed
 Powers of court
 Effect of winding up order
 Official liquidator to be liquidator of company
Duties of Liquidator
 Proceedings in winding up
 Report
 Custody of companies property
 Exercise and control of liquidators powers
 Meeting of creditors and contributories
 Directions from the court
 Proper books
 Audit of accounts
 Appointment of committee of inspection
 Pending liquidation
Statement of affairs
 Contains following particulars
 Assets of the company
 Debts and Liabilities
 Details of creditors and amount of secured
and unsecured debts
 Particulars of securities held by creditors
 Details of debts due to the company
 Any further information required by the
official liquidator
General powers of the court
 Stay of winding up proceedings
 Delivery of property
 Exclusion of creditors
 Order as to costs
 Summoning of persons suspected to having
property of the company
 Public examination
 Arrest of absconding contributory
 Meeting of creditors or contributories
Dissolution of the company
A company which has been dissolved no longer
exists as a separate entity capable of
holding property or of being sued in court
(Case : Employers liability assurance Corp. v
Sidgwick Collins & Co. 1927)


Grounds for dissolution :


 Affairsof company are completely wound up

 Liquidator cannot proceed with winding up
 For any other reason

Voluntary Winding up
 Windingup by the members or creditors of the
company without interference by the court.
 A company would wind up voluntarily :
o By passing an ordinary resolution
o By passing a special resolution
 Commencement of voluntary winding up
 Advertisement of resolution
 Types of voluntary winding up
o Members voluntary winding up
o Creditors voluntary winding up

Members voluntary winding up
 Declaration of solvency
 Provision applicable to members voluntary winding
up
o Appointment and remuneration of liquidators: Boards
power ceases to exist after the appointment of
liquidator
o Power to fill vacancy in office of liquidator
o Notice of appointment of liquidator to be given to
registrar
o Power of liquidator to accept shares, etc as a
consideration to sale of property
o Duty of liquidator to call creditors meeting in case of
insolvency
o Duty to call general meeting at the end of each year
o Final meeting and dissolution
Creditors voluntary winding up
 Provisionsapplicable to creditors voluntary
winding up
o Meeting of creditors
o Notice of resolution to be given to registrar
o Appointment of liquidator
o Appointment of committee of inspection
o Liquidators remuneration
o Boards powers to cease an appointment of liquidator
o Power to fill vacancy in office of liquidator
o Power of liquidator to accept shares
o Duty of liquidator to call meeting at the end of each
year
o Final meeting and dissolution
Winding up subject to supervision
of court

At anytime after a company has passed a
resolution for voluntary winding up, the court
may make the order that the voluntary
winding up shall continue, but subject to the
supervision of the court.


 Right to present winding up petition

 Effect of petition for winding up
 Power of court to appoint or remove
liquidators

Consequences of winding up
 Consequences as to shareholders/ members
 Consequences as to creditors
o Where the company is solvent
o Where the company is insolvent
o Secured and unsecured creditors
o Preferential payments
 Consequences as to servants and officers
 Consequences as to proceedings against the
company
 Consequences as to costs

Defunct Company
 Not carrying any business or not in operation
 Procedure to be followed by the registrar
o Letter to enquire if the company is operational
o Registered letter if no reply received within one
month
o Publication in the official gazette to strike of
name
o Same procedure in winding up if no liquidator is
acting or no return is received
o When is the company dissolved

Defunct company- Restoration of
Name
 Procedure to be followed for name restoration
o Application by aggrieved member or creditor
within 20 years
o Restoration of name by court on being satisfied
o Directions by the court
o Certified copy or order of court to be delivered
to registrar
o Letter or notice to company to be sent at
registered office or care of director etc or to
subscribers to memorandum.
o

Producer Companies

TILL RECENTLY, the Companies Act, 1956 (the
Act), recognised only three types of
companies, namely, companies limited by
shares (sub-divided into public limited and
private limited companies), companies limited
by guarantees and unlimited companies. With
the coming into force on February 6 of the
Companies (Amendment) Act 2002, (1 of
2003), a fourth category, `producer
companies,' finds a place in the Act.

Producer Company
 The new type is termed as `producer company', to
indicate that only certain categories of persons can
participate in the ownership of such companies. The
members have necessarily to be `primary producers,'
that is, persons engaged in an activity connected
with, or related to, primary produce.
 What is primary produce? In terms of the Act it is a
produce of farmers arising from agriculture including
animal husbandry, horticulture, floriculture,
pisciculture, viticulture, forestry, forest products,
re-vegetation, bee raising and farming plantation
products: produce of persons engaged in handloom,
handicraft and other cottage industries: by -
products of such products; and products arising out
of ancillary industries.

Producer Company - Formation
 Formation - Any ten or more individuals, each of
them being a producer, or connected with
primary produce activities
 On registration, the producer company shall
become as if it is a private limited company
with the significant difference that a minimum
of two persons cannot get them registered, the
provision relating to a minimum paid-up capital
of Rs. 1 lakh will not apply and the maximum
number of members can also exceed 50.
 Members' equity cannot be publicly traded but be
only transferred.
Producer Company - Object
 The objects of producer companies shall include one or
more of the eleven items specified in the Act, the more
important being:
(i) Production, harvesting, procurement, grading, pooling,

handling, marketing, selling, export of primary produce of

members or import of goods or services for their benefit;
(ii) Processing including preserving, drying, distilling, brewing,

venting, canning and packaging of produce of its members;

and
(iii) Manufacture, sale or supply of machinery, equipment or

consumables mainly to its members.

 The other objects include rendering technical or
consultancy services, insurance, generation, transmission
and distribution of power and revitalisation of land and
water resources; promoting techniques of mutuality and
mutual assistance; welfare measures and providing
education on mutual assistance principles.

Producer Company - Management
 Every producer company is to have at least five and not more than 15
directors. Minimum prescribed for private limited is two and for public
limited three, while the maximum will depend on the number mentioned
in the respective Articles. Usually the maximum is pegged at twelve.
 (b) A full time chief executive, by whatever name called, is to be appointed
by the board. He shall be an ex-officio director and will not be liable to
retire by rotation. He shall be entrusted with substantial powers of
management as the board may determine. This provision differs from
that applicable to limited companies — a private limited need not have
any chief executive while public limited companies, only with paid-up
capital exceeding Rs. 5 crores, have to have a managing director.
 (c) A stipulation that could dismay company secretaries is that only
producer companies having an average annual turnover exceeding Rs. 5
crores in each of three consecutive years need have a whole-time
secretary. It is not mentioned what would happen to the incumbent, if
the turnover falls below this minimum. This is in contrast to the
mandate that private and public limited companies having a paid-up
capital of Rs. 2 crores or more should have a whole-time secretary.

References
 http://www.thehindu.com/thehindu/biz/2003/06/30/st
 http://www.solutionexchange-un.net.in/food/resource/
 http://
www.vakilno1.com/bareacts/companiesact/s433.htm
 Elements of Mercantile Law – N.D. Kapoor
THANK YOU