winding up of private company

This query is : Resolved

CA. PABITRA MOHAN (Querist)
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22 November 2008 a pvt coy is winding up voluntarily.so just wanted to know as to how to close the accounts and the various other procedure involved in it

Ravikumar.G

Ravikumar.G (Expert)
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22 November 2008 Voluntary liquidation refers to the process whereby the shareholders appoint a liquidator, who is then answerable to the creditors or shareholders. It is not necessary to make any application to the court for this; however, the liquidator may apply to the court for directions and the court has power to remove a liquidator.

A voluntary liquidation may also by commenced by the board of directors if an event specified in the company’s constitution has occurred.

Voluntary liquidation may be in one of two forms, depending on whether or not the company is solvent. If the company is solvent the shareholders can supervise the liquidation. However, if the company is insolvent, the creditors may take control of the liquidation process by applying to the court. The court will require proof of solvency or insolvency to determine this matter.

Ravikumar.G

Ravikumar.G (Expert)
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22 November 2008 Broadly speaking, the liquidation process is as follows:

A liquidator is appointed, either by the company shareholders passing a resolution (voluntary liquidation) or by the Court making an order (compulsory liquidation).
The liquidator collects the assets of the company (including uncalled capital; that is, amounts unpaid on shares) and pays the creditors in order of priority.
The liquidator distributes any surplus funds to the shareholders.
The company is then formally dissolved.

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Ravikumar.G

Ravikumar.G (Expert)
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22 November 2008 The main consequences of the company being liquidated are as follows:

The company no longer has the power to dispose of its property.
The company may carry on business only for the limited purpose of completing the liquidation process.
The powers of the company directors come to an end when a liquidator is appointed.
A liquidation order operates as a notice of dismissal to all of the company’s employees. Note, however, that if an employee is on a fixed-term contract and is required under this contract to be given a period of notice, then a liquidation order will breach this and the employee will be entitled to damages.
When an application is made for a court-ordered liquidation, the court may stay or restrain any proceedings against the company as the court sees fit. When a liquidator is appointed, no person can begin or continue legal proceedings against the company or in relation to its property, unless the liquidator agrees or the court permits it.