Winding up of company

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Querist : Anonymous

Querist : Anonymous (Querist)

27 November 2013 Please urgently tell me the practical procedure for voluntary winding up of a private limited company ..

Sanket

Sanket (Expert)
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27 November 2013 Voluntary Winding Up of a Registered Company

When a company is wound up by the members or the creditors without the intervention of Tribunal, it is called as voluntary winding up. It may take place by:-

By passing an ordinary resolution in the general meeting if :- (i) the period fixed for the duration of the company by the articles has expired; or (ii) some event on the happening of which company is to be dissolved, has happened.

By passing a special resolution to wind up voluntarily for any reason whatsoever.
Within 14 days of passing the resolution, whether ordinary or special, it must be advertised in the Official Gazette and also in some important newspaper circulating in the district of the registered office of the company.

Ajay Mishra

Ajay Mishra (Expert)
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27 November 2013
MEMBERS' VOLUNTARY WINDING UP

Circumstances in which voluntary winding up may be made
A company may be wound up voluntarily, in case—
(i) where a company is formed for undertaking a fixed object and the articles provide that the company is to be dissolved on the completion of the object, the company may be dissolved voluntarily where an ordinary resolution is passed at a general meeting;
(ii) where the proposal is approved by a special resolution passed at the general meeting of the company.

Publication of the resolution of winding up

Section 485 provides that where a company has passed a resolution for voluntary winding up, notice of the resolution shall be given within 14 days of the passing of the same by advertisement in the Official Gazette and also in some newspaper circulating in the district where the registered office is situated.

Commencement of winding up

In terms of the provisions of section 486 of the Act, a voluntary winding up shall be deemed to commence at the time when the resolution for voluntary winding up is passed by the members.

Company may carry on business activities until the order for winding up is passed

In case of Orkay Industries Ltd. v State of Maharashtra (1999) 32 CLA 94 (Bom), it was held that it could not be said that on the presentation of petition for winding up, the affairs of a company would come to a standstill. Mere presentation of winding up petition would not prevent the company from continuing its business and its directors would not ceased to be directors until an order of winding up is passed by the Court (now Tribunal) or a provisional liquidator had been appointed.

Declaration of solvency

Section 488 of the Act provides that in case of a members' voluntary winding up, within five weeks immediately preceding the date of the passing of the resolution a declaration shall be made by two directors or where there are more than two directors, by a majority of the directors, at a meeting of the Board of directors, to the effect that they have made a full enquiry into the affairs of the company and that, having done so, they have formed the opinion that the company has no debts or that it will be able to pay its debts in full within such period not exceeding three years from the commencement of the winding up as may be specified in the declaration.
The declaration should also be duly verified by an affidavit and it should be accompanied by a copy of the report of the auditors of the company or the profit and loss account from the date upto which the last such account was prepared and ending with a date on close to the date of declaration as possible and on the balance sheet as on that date. The declaration and the auditor's report shall be filed with the Registrar of Companies with the e-Form 62 before the date of the resolution.
In case where the declaration has not been so made and delivered, it will be treated as a creditors voluntary winding up. Therefore, requirement of section 488(2) is mandatory in nature in as much as not only a declaration is required to be made but the same is required to be delivered within the period as provided under clause (a) of sub-section (2) of section 488 of the Companies Act. [Surat Dyes v Arya Silk Mills Pvt. Ltd. (2005) 125 Comp Cas 212 (Guj)].

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Ajay Mishra

Ajay Mishra (Expert)
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27 November 2013 Procedure for members' voluntary winding up
The company which proposes to proceed for voluntary winding up its affairs is required to comply with the following procedure for effective voluntary winding up:—
1. Convene a Board meeting by issuing notice to all the directors of the company as per provisions of section 286.
2. Within five weeks, immediately preceding the date of resolution for winding up, make sure that the company can pay its debts in full within a period of three years, if the company is put to liquidation and make a declaration therein to this effect in Form 149 prescribed under rule 313 of the Companies (Court) Rules, 1959. The declaration should also be verified by an affidavit.
3. Ensure that the aforesaid declaration is accompanied by:—
(i) the audited balance sheet and the profit and loss account ending on the latest practicable date before the date of declaration;
(ii) a statement of the company's assets and liabilities as at that date; and
(iii) a copy of the report of the auditors of the company on the above two documents. [Section 488(2)]
4. Approve in the said Board meeting the draft of the resolution for putting the company into members' voluntary winding up, appointing liquidator(s) and fixing his/their remuneration and it should also fix the date, time, place and agenda of the general meeting. [Sections 484 and 490]
5. If the winding up takes place as per the period or event determined in the articles of association, then the resolution required will be an ordinary resolution, otherwise a special resolution will be required. [Section 484(1)]
6. Confirm that a body corporate is not appointed as a liquidator. [Section 513]
7. The declaration mentioned in Item No. 2 above should be duly verified by an affidavit before a Judicial Magistrate and deliver the same with the concerned Registrar, with the e-Form 62 before the general meeting is held for passing the resolution for winding up. [Section 488(2)(a)]
8. Issue notices for the general meeting (not less than 21 days before the meeting) in writing proposing the ordinary or special resolution, as the case may be, with suitable explanatory statement. [Section 484(1)(a) and (b)] (Appendix 2)
9. Hold the general meeting and pass the ordinary resolution by ordinary majority or special resolution by 3/4th majority for winding up as the case may be.
10. It should be noted carefully that the winding up shall commence from the date and time of passing the requisite resolution by the members at their meeting.
11. In case of the listed company, forward promptly to all the stock exchanges in which the company is listed, 6 copies of notice and a copy of the proceedings of the general meeting.
12. Within 10 days of the passing of the resolution, file a notice with the e-Form 62 electronically with the concerned Registrar for the appointment of liquidator after paying a requisite fee as prescribed under Schedule X to the Companies Act, 1956 in the prescribed manner.
13. Submit to the liquidator a statement on the company's affairs in the prescribed form in duplicate, duly verified in e-Form 58 within 21 days from the commencement of winding up.
14. File the certified copies of the special or ordinary resolution as the case may be for winding up alongwith the explanatory statement with the concerned Registrar within 30 days of its passing in e-Form 23 with the requisite fees as per Schedule X of the Act.
15. Within 14 days of passing of the resolution for voluntary winding up, give a notice of the resolution in the Official Gazette and also advertise at least in two newspapers, one in English and one in local language circulating in the district where the registered office of the company is situated. [Section 485(1)]
16. In case of a listed company, forward promptly to the stock exchange with which the company is listed, 6 copies of the resolution advertised as above.

Ajay Mishra

Ajay Mishra (Expert)
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27 November 2013
17. Confirm that the liquidator files a notice of his appointment with the concerned Registrar together with the e-Form 62 in Form 152 of the Companies (Court) Rules, 1959, and publish the same in the Official Gazette in Form 151 of the said rules within 30 days of his appointment. [Section 516 and rule 315 of Companies (Court) Rules, 1959]
18. Also confirm that the liquidator gives notice of his appointment to the Income Tax Commissioner having jurisdiction on the company within 30 days of his appointment. [Section 178 of the Income-tax Act, 1961]
19. If vacancy occurs by death, resignation or otherwise in the office of the liquidator, call a general meeting to fill up the vacancy and also inform to the concerned Registrar about the vacancy and repeat the formalities as in items 12, 15 and 17 hereof.
20. If the liquidator at any time form an opinion that the company will not be able to pay its debts in full within the period stated in the declaration of solvency or that the period has expired without the debts having been paid in full, he has to summon forthwith a meeting of the creditors, and lay before the meeting a statement of the assets and liabilities of the company in Form 150 of the Companies (Court) Rules, 1959. [Section 495 and rule 314 of the Companies (Court) Rules, 1959]
21. In case if the process of winding up continues for more than a year, liquidator shall call a general meeting within 3 months from the end of every year from the date of commencement of winding up, or within such longer period as the Central Government may allow and lay before the meeting
the account of his acts and dealings together with the statements in Form 153 of the Companies (Court) Rules, 1959, and duly verified in Form 154 of the said Rules. [Section 496]
22. Where the case falls under item 21, the meeting of creditors is also required to be like wisely called except, in case of the meeting at the end of the first year where the same shall not be required to be called unless the meeting held under item 20 hereof has been held more than 3 months before the end of the year. [Rule 328 of the Companies (Court) Rules, 1959 and section 498]
23. If the winding up is not concluded within a year after its commencement then the liquidator shall file a statement with the concerned with the e-Form 62 electronically Registrar twice in every year. [Rule 327 of the Companies (Court) Rules, 1959]
24. The first year's statement should be duly audited for the full year, that is the period commencing from the appointment of the liquidator to the end of twelve months, from the commencement of winding up and thereafter subsequent statement in every 6 months. [Form 153 of the Companies (Court) Rules, 1959]
25. The aforesaid 2 statements should be duly verified in Form 154 of the said Rules and file the same with the concerned Registrar, electronically with the e-Form 62 within 12 months from the end of the year. [Rule 327 of the Companies (Court) Rules, 1959 and section 551]
26. The auditor's report should be in the form as agreed to between the Government and the Institute of Chartered Accountants of India, a draft of which may be taken from the concerned Registrar.
27. Even where there is no receipt and payment, the aforesaid statement is required to be filed stating this fact.
28. Complete the winding up by realising all assets and paying of all liabilities and returning the share capital and surplus, if any.
29. The provisions of sections 426 to 432, 452, 487, 491, 511, 511A, 512, 514, 515, 517 to 520, 528 to 549 and 553 to 556 and the prescribed forms and Rules of the Companies (Court) Rules, 1959, should also be noted in this respect.
30. As soon as affairs of the company are fully wound up, prepare the liquidators account of the winding up in Form 156 of the Companies (Court) Rules, 1959 and get the same audited as stated in Item No. 20 above. [Section 497]

Ajay Mishra

Ajay Mishra (Expert)
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27 November 2013 31. Call the final general meeting by giving notice in Form 155 of the Companies (Court) Rules, 1959. The notice has to be given not less than 1 month before the meeting in the Official Gazette and should also give advertisement in some newspaper circulating in the district where the Registered Office of the company is situated. [Section 497]
32. If the case falls in Item No. 20 hereof then call the creditors meeting also. [Section 498]
33. The company should also pass the special resolution for disposal of the books and papers of the company when the affairs of the company are completely wound up and it is about to be dissolved. [Section 550]
34. Within a week of the final meeting (and where the case falls within item 16 then within a week of members' meeting or the creditors' meeting, whichever is held later), file a copy of the above account with the concerned Registrar with the e-Form 62 electronically as well as with the Official Liquidator and file a return to each of them in Form 157 of the Companies (Court) Rules, 1959.
35. If required quorum is not present, in the aforesaid meeting, file a return in Form 158 of the Companies (Court) Rules, 1959. [Rule 331 of the Companies (Court) Rules, 1959]
36. The Registrar, on receiving the account and either the return mentioned in sub-section (3) of section 497, or the return mentioned in sub-section (4) of section 497, shall forthwith register them. [Section 497(5)]
37. The Official Liquidator, on receiving the account and either the return mentioned in sub-section (3) of section 497, or the return mentioned in sub-section (4) of section 497, shall as soon as may
be, make a scrutiny of books and papers of the company and the liquidator and all officers, past or present, of the company shall give the Official Liquidator all reasonable facilities to do so.
38. If on such scrutiny the Official Liquidator makes a report to the Court/Tribunal that the affairs of the company have not been conducted in a manner prejudicial to the interest of its members or to the public interest, then, from the date of the submission of the report to the Court/Tribunal, the company shall be deemed to be dissolved. [Section 497(6)]
39. If on such scrutiny the Official Liquidator makes a report to the Court/Tribunal that the affairs of the company have been conducted in a manner prejudicial, as aforesaid, the Court/Tribunal shall by an order direct to the Official Liquidator to make further investigations of the affairs of the company and for that purpose shall vest him with all such powers as the Court/Tribunal may deem fit. [Section 497(6A)]
40. On receipt of the report of the Official Liquidator on such further investigation, the Court/Tribunal may either make an order that the company shall stand dissolved with effect from the date to be specified by the Court/Tribunal therein or make such other order as per the circumstances of the case brought out in the report. [Section 497(6B)]
41. File the special resolution mentioned in item 32 with the concerned Registrar within thirty days of passing in the e-Form 23 electronically after paying the requisite fee prescribed under Schedule X to the Companies Act, 1956 in the prescribed manner.
42. The Court/Tribunal may in a fit case declare the dissolution void within two years of the date of dissolution on application by the liquidator of the company or by any other person who appears to the Court/Tribunal to be interested.
43. A person who obtains the said order of the Court/Tribunal shall file the certified copy of the Court/Tribunal's order with the Registrar in the e-Form 21 electronically within 30 days or such further time as may be allowed by the Court/Tribunal after paying the requisite fee prescribed under Schedule X to of the Companies Act, 1956 in the prescribed manner.

Ajay Mishra

Ajay Mishra (Expert)
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27 November 2013
Hope it will help you.

I will also suggest to also check any amendment maid therein by MCA.

Querist : Anonymous

Querist : Anonymous (Querist)

25 June 2014 thanks for the reply

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