Company Winding Up
ntroduction:
The liquidation or winding up means end of the company. It is the ermanent closing down of its business. A company is the creature of law. It, erefore, cannot die a natural death. The termination of its existence is affected by w. Thus winding up of the company is a legal procedure in which all the affairs of me company are would up. Its assets and liabilities are determined Assets are sold it and claims of the creditors met out of sale proceeds. The balance if any is stributed among shareholders in proportion of their shareholdings.
Modes or Methods of Winding Up
There are following three modes of winding up of Joint Stock Company:
1. Winding up by the Court:
Voluntary winding
According to section 305 & 306 of Companies Ordinance 1984, the court in following circumstances may wind up a company.
Special Resolution:
If, a special resolution has been passed by the company for winding up.
Start of Business:
If the company fails to start its business within one year from the date of incorporation or postpones its business for one year
Reduction in Members:
If the number of members falls below than seven in case of listed public
company and incase of private company below than two.
Statutory Meeting:
If the company fails to submit statutory report to registrar or fails to hold
statutory meeting within the specified period.
. Dissatisfaction of Court:
If the court is not satisfied with the working, management and business
affairs of the company
Failure to pay Debt:
A public company may be would up by the court, if it is proved that it is
unable to pay its debts
• Unlisted:
If the company is declared unlisted due to any reason.
2.Voluntary Winding Up:
Under section 358 of the ordinance, a joint stock company may be would up voluntarily by passing ordinary or special resolution in following two ways:
A .Member’s voluntary winding up.
Creditor’s voluntary winding up. A. Member’s Voluntary Winding up:
According to section 362 of companies Ordinance, the members can wind up the company voluntarily by the following process.
• Statutory Declaration:
If he majority of the directors make a statutory declaration to registrar that
the company will be able to pay its debts in full within one year.
Special or Ordinary Resolution:
After submitting the statutory declaration to the registrar, the company in general meeting passes an ordinary or special resolution to wind up the company
Appointment of Liquidators:
In general meeting, the company appoints the liquidators to wind up the company’s affairs and to distribute the assets of the company. After the appointment of liquidators, all the powers of the directors and officers are ceased. Within ten days after the appointment of liquidators, the notice regarding the appointment must be sent to registrar.
. Final Meeting:
If the process of liquidation continues for more than one year, the liquidator has to call a general meeting every year. After winding up the affairs of company, the liquidators call the final general meeting of the shareholders. In this meeting, the liquidator must submit the final accounts of company’s affairs to the members and a copy of full accounts is sent to the registrar within one week of general meeting. At the end of three months from the date of registration of the report, account and the return, the company shall be dissolved and its name will be struck off from the books of registrar of joint stock company.
B. Creditors Voluntary Winding up:
Under section 373 to 382 of the ordinance, the method of creditor’s voluntary
Solvency Declaration:
company to make a statutory declaration regarding its solvency.
winding up for joint stock company is given below: In case of creditor’s voluntary winding up, it is not necessary for the
• General Meeting:
A general meeting of the company’s shareholders is called to pass an extra ordinary resolution for the dissolution of company because it cannot continue its business due to heavy liabilities.
Creditor’s Meeting:
It is obligator on the company to call a meeting of the creditors of the
company on the same day or on the day following the meeting of
shareholders in which the resolution for winding up is proposed for this
purpose. A notice of creditor’s meeting must be sent to every creditor.
Statement of Company’s Affairs:
In the creditor’s meeting, the directors must submit a statement of affairs of the company together with a list of creditors of the company and estimated amount of their claims.
Intimation of Registrar:
The information regarding the notice of passed resolution must be registrar within ten days after the date of creditor’s meeting. sent to the
Appointment of Liquidator:
The creditors and shareholders will nominate the persons to act as liquidators. The opinion of the creditors is preferred.
Committee of Inspection:
The creditors and the members at their respective meeting may appoint a committee of inspection consisting of five persons in each committee. He must lie before the meeting an account of his acts for the winding up during the preceding year.
At the end of Winding up:
On completion of the winding up, the liquidators have to call final general meeting of the members and a meeting of creditors
Dissolution of the company:
At the end of three months from the date of registration return the company is dissolved and it ceases its legal entity.
3. Winding up Under the Supervision of the Court:
The following is the process of the court:
Resolution:
At first the company has to pass special or extra ordinary resolution to wind up voluntarily.
• Supervision Order:
The court may, if it thinks fit, order that the voluntary winding up shall continue but subject to the supervision of the court and on such terms and conditions as the court thinks just.
Power of the Court:
The court has power to appoint an additional liquidator to remove any
liquidator. But generally the liquidator appointed by the company for the voluntary winding up continues in office subject to his giving of security.
Dissolution of the Company:
When the supervision order made, the liquidator may exercise all his powers in a voluntary winding up. On completion of the winding up, the court will make an order that the company is dissolved
Grounds for Issuing a Supervision Order:
The grounds on which an order for supervision is made are summarized as follows
- .If the rules of winding up Dfa ho are not completely followed.
- If the liquidator acts in a partial manner. If the winding up resolution is obtained by fraud.
- If the liquidator disregards to dispose of the assets of the company.
