WINDING
UP AND DISSOLUTION OF A COMPANY
The
distinction between Winding up and Dissolution
The
winding-up of a company is done when a company cannot carry its business. The
winding up is a process whereby its live is ended and the property of the
company is administered by the administrator named as a liquidator who is
appointed to control the winding up process of the company, collects its
assets, pay its debts, and finally distribute the surplus among the members
according to their rights.
Whereas
dissolution put end to the existence of the company. Section 342 deals with the dissolution of the company. Dissolution
takes place when
·
The company’s affairs have been
completely wound up
·
Court feels that the official liquidator
cannot proceed with the winding-up procedure
·
When the court deems the dissolution fit
according to the circumstance of the case
Modes of Winding-up
Section 293
·
By the court
·
Voluntary
·
Subject to the supervision of court
Compulsory Winding up by the Court
The
winding-up procedure is when carried by the court it is called the compulsory
winding up. The cases in which the court can carry the process of winding up
are; S301
·
When a company has passed a special
resolution for compulsory winding up
·
Default made in delivering the statutory
report to the registrar or in holding the statutory meeting
·
Default is made on holding two
consecutive annual meetings
·
Default made in filing with registrar
its financial statement or annual returns for immediately preceding two
consecutive financial year
·
When the number of members is reduced
below three for a public company and below two for a private company
·
When a company is unable to pay debts
·
When a company is involved in fraudulent
activities
·
Carry on business prohibited by the law
·
Unfair or showing oppressive behaviour to
the minority members
·
When fail to maintain the company
properly
·
When members refuse to act according to
the constitutional documents of the company
Persons Entitled to apply for
Compulsory winding up
Section
304 gives
the list of persons who can file the petition for the winding-up of the
company. These are;
·
The company
·
By creditor or creditor
·
By any contributory or contributors
·
All or any of the aforesaid parties
·
By the registrar
·
By the commission's
·
By a person authorized by the commission
on that behalf
Procedure
for winding up of company and filing of the petition before Respective High
Court
To apply for winding up
the resolution of ¾ majority for the
compulsory winding-up will be made. If the company itself applying for winding
up its has to file a special resolution on form 26 by the registrar.
A list of assets are
prepared to ascertain that the company is unable to pay its debates
A list of creditors is
to be prepared
If company defaults in
payment the creditor or creditors have to make a decision for the filing of the
winding-up petition
Investigation before
the filing winding-up process is carried when the winding-up is filed by the
Commission, Registrar, or a person authorized by the commission
Advocates have to be engaged
in the preparation and filing of the petition.
Appointment
of Official liquidator
A liquidator is
appointed to wind up a company and the liquidator appointed by the court is
called the official liquidator.
Liquidators carry
matters like appointments, remuneration, removal title and so are addressed by
the section 315 to 323. The duties of the are to get in and set free the
property of the company, to pay its debts, and to distribute the surplus among
the members. The general powers of the liquidator are;
·
Can institute or defend any proceeding
on behalf of the company
·
To carry on the business of the company
·
To pay the creditors
·
To make any compromise or arrangement
with creditors
·
To compromise all calls and liabilities
to call, debts and liabilities capable of resulting in debts
·
To sell the movable and immovable
property
Voluntary
winding up
There are two types of
voluntary winding up
·
Members
·
Creditors
Members
Voluntary Winding-up
This type of winding-up
is carried when the winding-up is made upon declaration of solvency and is delivered
to the registrar according to the provisions of Section 351. The section says
that when the majority of the directors, including the board of directors at a
meeting with the chief executive make a declaration verified by the affidavit
and confirmed that the company has no debt or will pay all debts within twelve
months from the commencement of winding this makes volunteer winding up.
Reasons
for Members Voluntary winding up
Section 347 has listed
the reason for the voluntary winding up
·
When the company pass a resolution on
expiry of the duration or for the occurrence of any event that was mentioned in
its article
·
When a special resolution is passed
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