Winding Up Company

Winding Up Company
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    WINDING UPImportant chapter, Q comes every yearQ: meaning of winding up ã A process through which co life is ended and its property administered for the benet of its creditors and members. ã During winding up process, the management of a co’s aairs is taken out of directors hands and an administrator called liquidator is appointed. ã Liquidator is responsible for collection of debts and payment of liabilities and nally distributes surplus if any, among members in accordance with their rights. ã At the end of winding up process, the company will hae no assets and liabilities. ã !ut company continues to e ist after winding up and ceases to e ist only after a dissolution order is passed by the court. #hus inbetween the winding up and dissolution, the legal status of the company continues. Q: state the dierence etween winding up and inso!vency . ã  #he word insolency is used for indiidual and rm and word winding up is used for company. ã $n case of insolency, the whole of the insolent’s property is taken and rests in the court or the o%cial assignee. $n winding up, on the other hand, the property remains ested in the company. ã $n insolency, an insolent indiidual can obtain his discharge and continue liing and working freed from the burden of his debts. A co in liquidation cannot obtain its discharge and continue free from the burden of its debts. ã $n the case of an indiidual, the administration of his property by the o%cial assignee or the o%cial receier occurs only if he is declared an insolent by the court. !ut the assumption of the director’s powers by the liquidator occurs een if fully solent as in case of oluntary winding up. Q: winding up and disso!ution ã  #he entire process for bringing about a lawful end to the life of a company is diided into two stages  &inding up  Dissolution  ã &inding up is the rst stage in the process, whereby assets are sold, liabilities are paid o and surplus if any distributed among its members. ã Dissolution is the nal stage whereby the e istence of the company is withdrawn by law. ã  #he liquidator so appointed by the co or by court carries out the winding up proceedings but the order of dissolution is passed by court only. ã 'reditors can proe their debts in the winding up and not on the dissolution of the company. Q: what are the dierent methods in which a company may e wound up# (.compulsory winding up).oluntary winding upa.members oluntary winding upb.'reditors’ oluntary winding up.*.&inding up sub+ect to superision of court. Q: what is compu!sory winding up or winding up y the court# $%ive times& As per section **, the court may order the winding up of a co, if a petition is led with the court. -urisdiction of court for winding up petition ã  -urisdiction for entertaining winding up petition ests in the high court haing the +urisdiction in relation to the place where the registered o%ce of the company is situated. ã egistered o%ce means the place, which has longest been the registered o%ce of the company during / months immediately preceding the presentation of petition.0rounds on which a company may be wound up by the court  A.The company has passed a special resolution of its being wound up by the court. OR 0enerally not adopted as members prefer members oluntarywinding up in which they hae control and not court. B.Default is made in delivering the statutory report to the registrar or in holding the statutory meeting. OR  C.It does not commence business within a year from its incorporation or suspends entire business  for the whole  year. ORD.The number of members in the case of a public co is reduced below  and in case of private co is reduced below!. OR .It is unable to pay debts. OR#.The court is of the opinion that it is $ust and e%uitable that it should be wound up. 1 amples2 ã &here !$3 recommends winding up ã Deadlock in management. ã &here the company was formed to carry on a fraudulent or illegal business. Who may petition for winding up# ã  #he company ã Any creditor or creditors including any contingent or prospectie creditor or creditors. ã Any contributory 4s5 ã All or any of the parties specied aboe whether together or separately. ã 6' ã Any person authori7ed by the '0 ie following upon a report of inspection. Who cannot '!e winding up petition ã  #he wor(ers  hae no right to present winding up petition, but still entitled to appear and be heard in support or in opposition tothe winding up petition. Reason& their interest might be a'ectedby any order( which may be made on the winding up petition. ã An emp!oyee  who has not been paid his legal or statutory dues cannot be considered as creditor of a co.  Reason& remedy  provided under various labour laws. ã A trade union claiming as creditors of a co cannot present petition for the winding up of a co, but hae a right to be heard before any decision is taken by the court. ã Any creditor who has already led a normal ciil suit for recoery. #his is like a pressure tactics. )ommencement of winding up  $n case of a winding up by the court, the winding up shall be deemed to hae commenced at the time of presentation of the petition for the winding up.8oweer, where before the presentation of a petition for the winding up by the court, resolution has been passed by the company for oluntary winding up, the winding up of the co shall be deemed to hae commenced from the date of passing of resolution.eleance of date of commencement of winding up ã Disposition of co’s property and transfer of shares after commencement of winding up is oid. ã $t depends upon on the date of commencement of winding up, whether a person liable is liable as present or past member, to contribute to the company’s assets. Q: what are the conse*uences of a winding up# $+wice& 'ommunication of winding up order&here the court makes an order for the winding up of co, the court shall send intimation to o%cial liquidator and registrar. #his will enable the o%cial liquidator to take into possession the books, accounts an assets of the co.'opy of winding up order to be led with registrar ã %i!ing y whom# 3ollowing persons shall be duty bound2  9ersons who led a petition   #he company ã +ime !imit for '!ing the order:  the certied copy of order shallbe led with registrar within *: days from the date of making of the order of winding up. ã Noti'cation in the ocia! ga-ette: on ling such order with registrar, registrar shall notify in the 60 that such an order has been made. Discharge of ocers and emp!oyees ã Damages for wrongfu! dismissa! 2 where an employee has entered into a contract of serice for a particular period, an orderfor winding up will amount to wrongful discharge of contract and damages will hae to be paid for breach of contract.
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