Voluntary Winding Up Of Companies.docx

VOLUNTARY WINDING UP OF COMPANIES

PROJECT REPORT ON COMPANY LAW

SUBMITTED TO:

SUBMITTED BY: Sehej Sandhawalia B.A LL.B. (Hons) 8th Semester Section- B 272/14

Voluntary Winding Up of Companies

ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to DR. Harman Shergill , who gave me the golden opportunity to make this project on Voluntary Winding up of Companies, which helped me in doing a lot of deep rooted study and research and enlightened me regarding various different aspects of the Company Law.

2

Voluntary Winding Up of Companies

INDEX

3

Voluntary Winding Up of Companies

INTRODUCTION In the words of Professor Gower: “Winding up of a company is the process whereby its life is ended and its property administered for the benefit of its creditors and members. An administrator called the 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 Winding up of a company differs from the insolvency of an individual in as much as a company cannot be made insolvent under the insolvency laws. A perfectly solvent company may be wound up. The company is not dissolved immediately at the commencement of winding up. Its corporate status and powers continue. Company remains a taxpayer until dissolved by order of court.2 Winding up precedes dissolution.3 The Act provides for two kinds of winding up:  

Compulsory winding up under the order of the tribunal. Voluntary winding up, which itself is of two kindsi) Members voluntary winding up ii) Creditors voluntary winding up

Winding up of a company may be required due to a number of reasons including closure of business, loss, bankruptcy, passing away of promoters, etc., The procedure for winding up of a company can be initiated voluntarily by the shareholders or creditors or by a Tribunal. A company may be wound up voluntarily in the following two ways as per the Companies Act, 2013 : 1) By ordinary resolution – a company may be wound up voluntarily by passing an ordinary resolution when the period, if any, fixed for the duration of the company by the articles has expired. Similarly when the event, if any has occurred, on the occurrence of which the articles provide that the company is to be dissolved, the company may, by passing an ordinary resolution to that effect, commence its voluntary winding up. 2) By special resolution – a company may at any time pass a special resolution providing that the company be wound up voluntarily.

1

The Principles of Modern Company Law, (3rd Edn 1969) 647 Official Liquidator v. Commr, (1992) 73 Comp Cas 168 (Mad) 3 Pierce Leslie and Co. Ltd v. Violet Ouchterlong, AIR 1969 SC 843 2

4

Voluntary Winding Up of Companies

1. Declaration of solvency in case of proposal to wind up voluntarily4 - Under the Act of 2013 only voluntary winding up by members exists. (1) Where it is proposed to wind up a company voluntarily, its director or directors, or in case the company has more than two directors, the majority of its directors, shall, 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 they have formed an opinion that the company has no debt or whether it will be able to pay its debts in full from the proceeds of assets sold in voluntary winding up. (2) A declaration made under sub-section (1) shall have no effect for the purposes of this Act, unless— (a) it is made within five weeks immediately preceding the date of the passing of the resolution for winding up the company and it is delivered to the Registrar for registration before that date; (b) it contains a declaration that the company is not being wound up to defraud any person or persons; (c) it is accompanied by a copy of the report of the auditors of the company prepared in accordance with the provisions of this Act, 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 that date which would also contain a statement of the assets and liabilities of the company on that date; and (d) where there are any assets of the company, it is accompanied by a report of the valuation of the assets of the company prepared by a registered valuer. (3) Where the company is wound up in pursuance of a resolution passed within a period of five weeks after the making of the declaration, but its debts are not paid or provided for in full, it shall be presumed, until the contrary is shown, that the director or directors did not have reasonable grounds for his or their opinion under sub-section (1). (4) Any director of a company making a declaration under this section without having reasonable grounds for the opinion that the company will be able to pay its debts in full from the proceeds of assets sold in voluntary winding up shall be punishable with imprisonment for a term which shall not be less than three years but which may extend to five years or with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees, or with both.

The declaration is to be made by a majority of the directors at a meeting of the board and verified by an affidavit. They have to declare that they have made a full inquiry into the affairs of the company and have formed the opinion that the company has no debts or that it will be able to pay its debts in full from the sale of assets. In order for the declaration to be effective, it must be 4

Section 305 of Companies Act, 2013

5

Voluntary Winding Up of Companies

made within five weeks immediately before the date of resolution and should be delivered to the registrar for registration before that date. The declaration is to contain a statement that the company is not being wound up to defraud any person or persons. It should also be accompanied by a copy of the report of the auditors on the profit and loss account and the balance sheet of the company prepared up to the date of the declaration and should embody a statement of the company’s assets and liabilities as at that date.5

2. Meeting of creditors6 - (1) The company shall along with the calling of meeting of the company at which the resolution for the voluntary winding up is to be proposed, cause a meeting of its creditors either on the same day or on the next day and shall cause a notice of such meeting to be sent by registered post to the creditors with the notice of the meeting of the company under section 304. (2) The Board of Directors of the company shall— (a) cause to be presented a full statement of the position of the affairs of the company together with a list of creditors of the company, if any, copy of declaration under section 305 and the estimated amount of the claims before such meeting; and (b) appoint one of the directors to preside at the meeting. (3) Where two-thirds in value of creditors of the company are of the opinion that— (a) it is in the interest of all parties that the company be wound up voluntarily, the company shall be wound up voluntarily; or (b) the company may not be able to pay for its debts in full from the proceeds of assets sold in voluntary winding up and pass a resolution that it shall be in the interest of all parties if the company is wound up by the Tribunal in accordance with the provisions of Part I of this Chapter, the company shall within fourteen days thereafter file an application before the Tribunal. (4) The notice of any resolution passed at a meeting of creditors in pursuance of this section shall be given by the company to the Registrar within ten days of the passing thereof. (5) If a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to two lakh rupees and the director of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than fifty thousand rupees but which may extend to two lakh rupees, or with both.

Post the Act of 2013 the requirement now is that after the members meeting for voluntary winding up a meeting of creditors must also be called. Such meeting has to be called or held on the same day or next day by sending notice of the meeting to creditors with the notice of the meeting of the company. The Board of directors have to put before the meeting a full statement 5 6

Surat Dyes v. Arya Silk Mills, (2005) 125 Comp Cas 212 Section 306, Companies Act,2013

6

Voluntary Winding Up of Companies

of affairs of the company, list of creditors, a copy of the declaration of solvency and the estimated amount of claims. One of the directors has to preside over the meeting. If two third in value of the creditors are of the opinion that it is in the interest of all parties that the company would be wound up voluntarily, the company’s voluntary winding up is to proceed. If they are of the opinion that the company may not be able to pay its debts in full form proceeds of its assests in voluntary winding up and they pass a resolution that it is to be in interest of all parties if the company is wound up by the Tribunal, the company has to file an application before the Tribunal within 14 days. Within 10 days a notice of the resolution is to be given to the company and registrar. Any contravention of the provisions of the section renders the company punishable with fine not less than Rs. 50,000, extending to Rs. 2,00,000. A director in default is punishable with imprisonment for a term extending to six months or with fine not less than Rs. 50,000 extending to Rs. 2,00,000 or with both.

3. Publication of resolution7— (1) Where a company has passed a resolution for voluntary winding up and a resolution under sub-section (3) of section 306 is passed, it shall within fourteen days of the passing of the resolution give notice of the resolution by advertisement in the Official Gazette and also in a newspaper which is in circulation in the district where the registered office or the principal office of the company is situate. (2) If a company contravenes the provisions of sub-section (1), the company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees for every day during which such default continues.

4. Commencement of voluntary winding up8 - A voluntary winding up shall be deemed to commence on the date of passing of the resolution for voluntary winding up under section 304. 5. Effect of voluntary winding up9 - In the case of a voluntary winding up, the company shall from the commencement of the winding up cease to carry on its business except as far as required for the beneficial winding up of its business: Provided that the corporate state and corporate powers of the company shall continue until it is dissolved. 6. Appointment of company liquidator10— (1) The company in its general meeting, where a resolution of voluntary winding up is passed, shall appoint a Company Liquidator from the panel

7

Section 307, Companies Act, 2013 Section 308, Companies Act, 2013 9 Section 309, Companies Act, 2013 10 Section 310, Companies Act 2013 8

7

Voluntary Winding Up of Companies

prepared by the Central Government for the purpose of winding up its affairs and distributing the assets of the company and recommend the fee to be paid to the Company Liquidator. (2) Where the creditors have passed a resolution for winding up the company under sub-section (3) of section 306, the appointment of the Company Liquidator under this section shall be effective only after it is approved by the majority of creditors in value of the company: Provided that where such creditors do not approve the appointment of such Company Liquidator, creditors shall appoint another Company Liquidator. (3) The creditors while approving the appointment of Company Liquidator appointed by the company or appointing the Company Liquidator of their own choice, as the case may be, pass suitable resolution with regard to the fee of the Company Liquidator. (4) On appointment as Company Liquidator, such liquidator shall file a declaration in the prescribed form within seven days of the date of appointment disclosing conflict of interest or lack of independence in respect of his appointment, if any, with the company and the creditors and such obligation shall continue throughout the term of his or its appointment. The general meeting at which a resolution for voluntary winding up is passed, a company liquidator has to be appointed from the panel prepared by the Central Government for winding up its affairs and distribute its assets and recommend the fee to be paid to the liquidator. If the creditors have passed a resolution under Section 306 (3) the appointment of the liquidator is to be effective only if a majority in value of the creditors have approved it. Where such creditors do not approve the appointment, the creditors have to appoint another liquidator. They also have to pass a suitable resolution for fixing the fee. The appointee has to file a declaration within 7 days disclosing any conflict of interest or lack of independence with the company or creditors. This obligation is to continue throughout the term of appointment.

7. Power to remove and fill vacancy11 - (1) A Company Liquidator appointed under section 310 may be removed by the company where his appointment has been made by the company and, by the creditors, where the appointment is approved or made by such creditors. (2) Where a Company Liquidator is sought to be removed under this section, he shall be given a notice in writing stating the grounds of removal from his office by the company or the creditors, as the case may be. (3) Where three-fourth members of the company or three-fourth of creditors in value, as the case may be, after consideration of the reply, if any, filed by the Company Liquidator, in their meeting decide to remove the Company Liquidator, he shall vacate his office. (4) If a vacancy occurs by death, resignation, removal or otherwise in the office of any Company Liquidator appointed under section 310, the company or the creditors, as the case may be, fill the vacancy in the manner specified in that section.

11

Section 311, Companies Act 2013

8

Voluntary Winding Up of Companies

A company liquidator appointed by the company can be removed by it and that appointed by creditors can be removed by them. He has to be given a notice in writing stating the grounds of his removal. Three-fourth members or creditors have to consider the reply before deciding the question of removal. If they decide to remove him, he has to vacate his office. If a vacancy occurs by death, resignation or removal or otherwise, it has to be filled by members’ or creditors’ appointee. A liquidator can be removed if he has not deposited certain amounts as required by him under S. 350 of the Act and is acting in a collusive manner.12

8. Notice of appointment to be given to Registrar13— (1) The company shall give notice to the Registrar of the appointment of a Company Liquidator along with the name and particulars of the Company Liquidator, of every vacancy occurring in the office of Company Liquidator, and of the name of the Company Liquidator appointed to fill every such vacancy within ten days of such appointment or the occurrence of such vacancy. (2) If a company contravenes the provisions of sub-section (1), the company and every officer of the company who is in default shall be punishable with fine which may extend to five hundred rupees for every day during which such default continues.

9. Cesser of Boards powers after appointment14- On the appointment of a Company Liquidator, all the powers of the Board of Directors and of the managing or whole-time directors and manager, if any, shall cease, except for the purpose of giving notice of such appointment of the Company Liquidator to the Registrar. It was held by the Bombay High Court that directors continue to be directors until orders of winding up are passed. Hence continuing to occupy company premises under arrangement of gratuitous license which was not terminated remained valid till order of winding up. There was no liability to pay compensation up to that day.15

12

Hardit Singh v Registrar of Companies, (1972) 42 Comp Cas 256 (Del) Section 312, Companies Act, 2013 14 Section 313, Companies Act, 2013 15 Majid Ahmedbhai Oomerbhoy v. Rashid Sattar Oomerbhoy, (2006) 132 Comp Cas 382 13

9

Voluntary Winding Up of Companies

10. Powers and Duties of the Company Liquidator16— (1) The Company Liquidator shall perform such functions and discharge such duties as may be determined from time to time by the company or the creditors, as the case may be. (2) The Company Liquidator shall settle the list of contributories, which shall be prima facie evidence of the liability of the persons named therein to be contributories. (3) The Company Liquidator shall call general meetings of the company for the purpose of obtaining the sanction of the company by ordinary or special resolution, as the case may require, or for any other purpose he may consider necessary. (4) The Company Liquidator shall maintain regular and proper books of account in such form and in such manner as may be prescribed and the members and creditors and any officer authorised by the Central Government may inspect such books of account. (5) The Company Liquidator shall prepare quarterly statement of accounts in such form and manner as may be prescribed and file such statement of accounts duly audited within thirty days from the close of each quarter with the Registrar, failing which the Company Liquidator shall be punishable with fine which may extend to five thousand rupees for every day during which the failure continues. (6) The Company Liquidator shall pay the debts of the company and shall adjust the rights of the contributories among themselves. (7) The Company Liquidator shall observe due care and diligence in the discharge of his duties. (8) If the Company Liquidator fails to comply with the provisions of this section except sub-section (5) he shall be punishable with fine which may extend to ten lakh rupees. The company liquidator has to perform such functions and discharge such duties as may be required by the company or creditors. He has to settle the list of contributories. This will serve as prima facie evidence of liability of persons shown in the list. He can call general meetings of the company when necessary for his working. He has to maintain regular and proper books of account. They can be inspected by any member or creditor or any person authorized by the Central Government. He has to make a quarterly statement of accounts, get it audited within 30 days from the close of each quarter and file it with the registrar. Default in this respect is punishable. He has to pay the debts of the company and adjust the rights of contributories. He has to observe due care and diligence in the discharge of his duties. The Court will not interfere with the Liquidators action unless the liquidator was acting fraudulently or failed to exercise his discretion bona fide or that he was purporting to do an act which no reasonable man would do. Mere negligence of the liquidator will not be sufficient to interfere with the functioning of the liquidator.17 In a winding up by the Court, the liquidator is an officer of the court, and not an agent of the parties concerned. In a voluntary winding up, he is not an officer of the Court. He owes his appointment to the company. The liability of a liquidator for breach of his duties involves the 16 17

Section 314, Companies Act, 2013 M Harold Pitman & Co. v. Top Business Systems Ltd, (1984) BCLC 593

10

Voluntary Winding Up of Companies

application of agency principles. Functionally, the liquidator is an agent of the company and not a trustee for shareholders or creditors. An individual shareholder or creditor cannot sue him for damages for delaying payments unless it is due to some deliberate misconduct towards a particular person. The proper remedy is to seek an order of the court in reference to his conduct.18 The liquidator becomes functus officio on the dissolution of the company. He cannot exercise any power after the dissolution of the company.19 He however remains liable for his acts and omissions in his capacity as a liquidator before dissolution of the company.20

11. Appointment of committees21— Where there are no creditors of a company, such company in its general meeting and, where a meeting of creditors is held under section 306, such creditors, as the case may be, may appoint such committees as considered appropriate to supervise the voluntary liquidation and assist the Company Liquidator in discharging his or its functions. 12. Company Liquidator to submit report on progress of winding up22— (1) The Company Liquidator shall report quarterly on the progress of winding up of the company in such form and in such manner as may be prescribed to the members and creditors and shall also call a meeting of the members and the creditors as and when necessary but at least one meeting each of creditors and members in every quarter and apprise them of the progress of the winding up of the company in such form and in such manner as may be prescribed. (2) If the Company Liquidator fails to comply with the provisions of sub-section (1), he shall be punishable, in respect of each such failure, with fine which may extend to ten lakh rupees. The company liquidator has to report quarterly on the progress of winding up to members and creditors. He has also to call their meetings, at least once in every quarter, and apprise them of the progress of winding up. 13. Report of Company Liquidator to Tribunal for examination of persons23— (1) Where the Company Liquidator is of the opinion that a fraud has been committed by any person in respect of the company, he shall immediately make a report to the Tribunal and the Tribunal shall, without prejudice to the process of winding up, order for investigation under section 210 and on consideration of the report of such investigation, the Tribunal may pass such order and give such directions under this Chapter as it may consider necessary including the direction that 18

Knowles v. Scott (1891) 1 CH 717 Shankar Lal v. Narendra Bahadaur Tandon, (1967) Comp Cas 773 20 Pulsford v. Devenish, (1903) 2 Ch 625 21 Section 315, Companies Act, 2013 22 Section 316, Companies Act, 2013 23 Section 317, Companies Act, 2013 19

11

Voluntary Winding Up of Companies

such person shall attend before the Tribunal on a day appointed by it for that purpose and be examined as to the promotion or formation or the conduct of the business of the company or as to his conduct and dealings as officer thereof or otherwise. (2) The provisions of section 300 shall mutatis mutandis apply in relation to any examination directed under sub-section (1). When the company liquidator is of the opinion that a fraud has been committed by any person in respect of the company, he is to immediately make a report to the tribunal, which may order investigation under Section 210. On receiving the report and its examination, the Tribunal may pass necessary orders including the orders for his appearance before the Tribunal. He may be examined as to his conduct in the matters of the Company. The provisions of Section 300 are applicable to such examination.

13. Final meeting and dissolution of company24— (1) As soon as the affairs of a company are fully wound up, the Company Liquidator shall prepare a report of the winding up showing that the property and assets of the company have been disposed of and its debt fully discharged or discharged to the satisfaction of the creditors and thereafter call a general meeting of the company for the purpose of laying the final winding up accounts before it and giving any explanation therefore (2) The meeting referred to in sub-section (1) shall be called by the Company Liquidator in such form and manner as may be prescribed. (3) If the majority of the members of the company after considering the report of the Company Liquidator are satisfied that the company shall be wound up, they may pass a resolution for its dissolution. (4) Within two weeks after the meeting, the Company Liquidator shall— (a) send to the Registrar— (i) a copy of the final winding up accounts of the company and shall make a return in respect of each meeting and of the date thereof; and (ii) copies of the resolutions passed in the meetings; and (b) file an application along with his report under sub-section (1) in such manner as may be prescribed along with the books and papers of the company relating to the winding up, before the Tribunal for passing an order of dissolution of the company. (5) If the Tribunal is satisfied, after considering the report of the Company Liquidator that the process of winding up has been just and fair, the Tribunal shall pass an order dissolving the company within sixty days of the receipt of the application under sub-section (4). (6) The Company Liquidator shall file a copy of the order under sub-section (5) with the Registrar within thirty days. (7) The Registrar, on receiving the copy of the order passed by the Tribunal under subsection (5), shall forthwith publish a notice in the Official Gazette that the company is dissolved.

24

Section 318, Companies Act, 2013

12

Voluntary Winding Up of Companies

(8) If the Company Liquidator fails to comply with the provisions of this section, he shall be punishable with fine which may extend to one lakh rupees. After completion of the affairs of winding up, the company liquidator has to prepare a report of the winding up showing that the assets and properties of the company have been fully disposed off and its debts have been fully discharged to the satisfaction of the creditors. He has then to call a general meeting of the company and lay before it final accounts with his explanations. If a majority of members are satisfied with the report of the liquidator and feel that the company should be wound up, they may pass a resolution for its dissolution. Within two weeks, after the meeting the company liquidator has to send to the registrar a copy of the final winding up accounts and make a return in respect of each meeting and its date and copies of the resolution passed in the meetings. He has to file an application along with his report and also books and papers before the tribunal for passing the order of dissolution. If the Tribunal is satisfied that the process of winding up has been just and fair it may within 60 days pass the order of dissolution. Within 30 days the liquidator has to file a copy of the order with the Registrar. The latter has to publish a notice in the Official Gazette that the company has dissolved. Any unclaimed property of the Company becomes vested in the State and cannot be made the subject matter of litigation without impleading the State.25

14. Power of Company Liquidator to accept shares, etc., as consideration for sale of property of company26— (1) Where a company (the transferor company) is proposed to be, or is in the course of being, wound up voluntarily and the whole or any part of its business or property is proposed to be transferred or sold to another company (the transferee company), the Company Liquidator of the transferor company may, with the sanction of a special resolution of the company conferring on him either a general authority or an authority in respect of any particular arrangement,— (a) receive, by way of compensation wholly or in part for the transfer or sale of shares, policies, or other like interest in the transferee company, for distribution among the members of the transferor company; or (b) enter into any other arrangement whereby the members of the transferor company may, in lieu of receiving cash, shares, policies or other like interest or in addition thereto, participate in the profits of, or receive any other benefit from, the transferee company: Provided that no such arrangement shall be entered into without the consent of the secured creditors. (2) Any transfer, sale or other arrangement in pursuance of this section shall be binding on the members of the transferor company. (3) Any member of the transferor company who did not vote in favour of the special resolution and expresses his dissent therefore in writing addressed to the Company Liquidator, and left at the 25 26

Biswanath Khan v. Prafulla Kumar Khan, (1989) 66 Comp Cas 452 Section 319, Companies Act, 2013

13

Voluntary Winding Up of Companies

registered office of the company within seven days after the passing of the resolution, may require the liquidator either— (a) to abstain from carrying the resolution into effect; or (b) to purchase his interest at a price to be determined by agreement or the registered valuer. (4) If the Company Liquidator elects to purchase the member‘s interest, the purchase money, raised by him in such manner as may be determined by a special resolution, shall be paid before the company is dissolved. The company liquidator of the transferor company, with the sanction of a special resolution of the company which confers upon him a general authority or authority for a particular arrangement only, has to do any of the following things : a) Receive, by way of compensation for the transfer or sale of shares, policies or other like interest in the transferee company for distribution among members of the transferor company. b) Enter into any other arrangement by which the members of the transferor company may, in place of receiving cash, participate in the profits of the transferee company or receive any other benefit from it. No such arrangement is to be entered into without the consent of secured creditors. A dissenting member may require the liquidator to abstain from carrying the resolution into effect or to purchase his interest at a price to be settled by agreement or by a registered valuer. Such purchase money has to be paid before the company is dissolved.

15.

Distribution of property of company27— Subject to the provisions of this Act as to overriding preferential payments under section 326, the assets of a company shall, on its winding up, be applied in satisfaction of its liabilities pari passu and, subject to such application, shall, unless the articles otherwise provide, be distributed among the members according to their rights and interests in the company. While distributing the assets of the company in winding up, the liquidator must take proper steps to ascertain who are the creditors of the company and what are the claims against the company. If due to negligence of the liquidator a creditor is not paid or a claim is not satisfied or if he fails to make any provision for any contingent liability, the liquidator may be made personally liable by the claimant.28

27 28

Section 320, Companies Act, 2013 Armstrong Whitworth Securities Co. Ltd. (1947) Ch. 673

14

Voluntary Winding Up of Companies

16. Arrangement when binding on company and creditors29— (1) Any arrangement other than the arrangement referred to in section 319 entered into between the company which is about to be, or is in the course of being wound up and its creditors shall be binding on the company and on the creditors if it is sanctioned by a special resolution of the company and acceded to by the creditors who hold three-fourths in value of the total amount due to all the creditors of the company. (2) Any creditor or contributory may, within three weeks from the completion of the arrangement, apply to the Tribunal and the Tribunal may thereupon amend, vary, confirm or set aside the arrangement. An arrangement may be entered into between a company which is about to be wound up or is already in the process of being wound up and its creditors. Any such arrangement is to bind the company and its creditors if it is sanctioned by a special resolution of the company and acceded by the creditors who hold ¾ in value of the total amount due to all creditors. Within three weeks from completion of the arrangement, any creditor or contributory may apply to the Tribunal which may amen, vary, confirm or set aside the arrangement.30

17. Power to apply to Tribunal to have questions determined, etc31— (1) The Company Liquidator or any contributory or creditor may apply to the Tribunal— (a) to determine any question arising in the course of the winding up of a company; or (b) to exercise as respects the enforcing of calls, the staying of proceedings or any other matter, all or any of the powers which the Tribunal might exercise if the company were being wound up by the Tribunal. (2) The Company Liquidator or any creditor or contributory may apply to the Tribunal for an order setting aside any attachment, distress or execution put into force against the estate or effects of the company after the commencement of the winding up. (3) The Tribunal, if satisfied on an application under sub-section (1) or sub-section (2) that the determination of the question or the required exercise of power or the order applied for will be just and fair, may allow the application on such terms and conditions as it thinks fit or may make such other order on the application as it thinks fit. (4) A copy of an order staying the proceedings in the winding up, made under this section, shall forthwith be forwarded by the company, or otherwise as may be prescribed, to the Registrar, who shall make a minute of the order in his books relating to the company. The company liquidator or any contributory creditor may apply to the Tribunal: 29

Section 321, Companies Act, 2013 IRC v. Adams and Partners, (1999) BCLC 730 31 Section 322, Companies Act, 2013 30

15

Voluntary Winding Up of Companies

a) To determine any questions arising in the course of winding up of the company b) To exercise as respects the enforcing of calls, staying of proceeds or any of the powers which the Tribunal might exercise if the company were being wound up by the tribunal. The company liquidator or any creditor or contributory may apply to the Tribunal for an order to set aside any attachment, distress or execution put into force against the estate or effects of the company after commencement of winding up.

18. Costs of voluntary winding up32— All costs, charges and expenses properly incurred in the winding up, including the fee of the Company Liquidator, shall, subject to the rights of secured creditors, if any, be payable out of the assets of the company in priority to all other claims. All costs charges and expenses properly incurred in the winding up, including the remuneration of the liquidator, are subject to the rights of secured creditors, payable out of the assets of the company in priority to all other claims. Rents paid for premises which were necessary for winding up are expenses properly incurred, but not accumulated lease money for property which was retained out of sheer inaction.33 The expenses incurred by the liquidator in proceeds against directors for preferential payments and wrongful trading were held to be costs, charges and other expenses incurred in the course of winding up. They had priority over preferential creditors irrespective of the success or failure of the proceedings.34

19. EFFECTS OF THE AMENDMENT BY THE INSOLVENCY AND BANKRUPTCY CODE 2016 Section 305 – 323 of the 2013 Companies Act has been deleted by Schedule XI of the Bankruptcy Code. Section 59 in Chapter V in part I of the bankruptcy Code provides the scheme and conditions for the voluntary winding up of companies. Voluntary winding up of companies is henceforth covered by the provisions of the Bankruptcy Code.

32

Section 323, Companies Act, 2013 Linda Marie Ltd 1989 BCLC 46 34 Floor Fourteen Ltd (1999) BCLC 666 33

16

Voluntary Winding Up of Companies

BIBLIOGRAPHY

ACTS:  The Companies Act, 2013, Universal Law Publishing, 2017  The Insolvency and Bankruptcy Code, 2016 , Universal Law Publishing

BOOKS:  Avtar Singh, Company Law, Eastern Book Company, 16th Edition 2015  C.R Datta, Company Law, Lexis Nexis, 7th Edition 2017  Kailash Rai, Principles of Company Law, Allahabad Law Agency, 2006

WEBSITES:  

 

http://www.indiacode.nic.in/acts-in-pdf/2016/201631.pdf https://www.lakshmisri.com/News-andPublications/Publications/articles/Corporate/winding-uplegal-position-undercompanies-act-2013-vis-vis-insolvency-and-bankruptcy-code-2016 https://taxguru.in/company-law/voluntary-winding-companies-companies-act2013.html https://www.chambersandpartners.com/article/903/the-insolvency-and-bankruptcycode-2016

17