The term winding up company may be defined as the proceeding by which a company is dissolved (i.e. life of the company is put to an end). Thus, winding up company is the process of putting an end to the life of the company.

LIQUIDATOR:

A person appointed to carry out the winding up company is called a liquidator. The duties of a liquidator include getting in and realizing the property of the company, paying its debts, and distributing the surplus (if any) among the members.

Modes of winding up company:

The winding up company may either be:

• Court.
• Voluntarily.
• Subject to the supervision of the court.

Winding up company by the court:

Circumstances that may lead to wounding by court range from a special resolution by the company, default in holding a statutory meeting or AGM, financial distress, conducting the business of fraudulent nature, and other factors.

Procedure for winding up company and filing of the petition before respective High Court

• Passing a special resolution.
• Preparation of a list of assets to ascertain that company is unable to pay its debts.
• Prepare a list of creditors.
• Registrar, Commission, or Registrar filing a petition after investigating affairs of the company.

Procedure for voluntary windup:

The following steps are to be taken for Member’s voluntary winding up company under the provision of the Act:

Step 1: Where it is proposed to winding up company voluntarily its directors make a declaration of solvency on Form 107 along with the auditor’s report.

Step 2: The company on the recommendation of directors decides that the company be wound up voluntarily and passes a special resolution in a general meeting, appointing a liquidator and fixing its remuneration.

Step 3: Notice of resolution shall be notified in Official Gazette within 10 days and also published in newspapers simultaneously.

Step 4: Notice of appointment or change of liquidator is to be given to Registrar.

Step 5: If the liquidator feels that the full claims of the creditors cannot be met, he must call a meeting of creditors and place before them a statement of assets and liabilities.

Step 6: If the winding up company continues beyond one year, the liquidator should summon a general meeting at the end of each year and make an application to the Court seeking extension of time

Step 7: A return of convening of each general meeting together with a copy of the notice, accounts statement, and minutes of the meeting to be filed with the Registrar within 10 days of the meeting

Step 8: Within a week after the meeting, the liquidator shall send to the Registrar a copy of the report and accounts

DOCUMENTS REQUIRED FOR VOLUNTARILY WINDING UP BY MEMBERS:

• Special Resolution on Form 26.
• Declaration of solvency on Form 107.
• Affidavit by Directors of the company including Chief Executive verifying the attached auditor’s report, profit and loss account, balance sheet, statement of assets and liabilities prepared from the date of closing of last accounts till the latest practicable date, immediately before making of the declaration.
• Consent of liquidator.
• A copy of the notice of resolution passed for the windup company voluntarily and published in Official Gazette.
• A copy of the preliminary report by the liquidator.
• The final Report and accounts of the company prepared by the liquidator were presented in a general meeting of shareholders after the finalization of winding up.
• Notice of final meeting.
• Return containing final report and accounts along with minutes of meeting to be filed with the concerned CRO.

CREDITORS VOLUNTARY WINDUP COMPANY:

Step 1:

The company passes a special resolution in the general meeting of the members of the company. Which following steps are to be taken:

• BOD approves the agenda of the general meeting especially the draft special resolution for winding up the company
• Notice of the general meeting along with a copy of the draft special resolution is given to the members at least1 the day before the general meeting.
• Special Resolution is passed by 3/4^th majority of the members of the company and the members appoint a person to be the liquidator of the company.
• Special Resolution on Form 26 is filed with Registrar

Step 2:

A meeting of creditors is called a 21 days notice (simultaneously with sending of the notices of the general meeting of the company) notice of the meeting of creditors to be sent by post to the creditors, besides, the notice of the said meeting to be advertised in the Official Gazette and the newspaper circulated in Province and creditors pass a resolution of voluntary winding up of the company. The creditors also appoint a liquidator in that meeting. If the creditors and the company nominate different persons, then the persons nominated by creditors shall be liquidators

Step 3:

Notice of the resolution passed at the creditors’ meeting shall be given by the company to the registrar along with the consent of the liquidator within 10 days of passing the special resolution.

Step 4:

The liquidator Should legalize the assets, prepares a list of creditors and settles them, and pays the liquidator store’s cost including his remuneration.

Step 5:

In the event of windup company continuing for more than 1 year, the liquidator shall summon a general meeting of the company and a meeting of creditors at the end of the first year from the commencement of winding up and lay before the meeting an audited account of receipts and payments and act and dealing of the company.

Step 6

The liquidators prepare the account, get them audited, and also present a final report to creditors.