Winding up of Company
Winding up of a company is the stage, where by the company takes its last breath. It is a process by which business of the company is wound up, and the company ceases to exist anymore. All the assets of the company are sold, and the proceedings collected are used to discharge the liabilities on a priority basis.
Modes of winding up :
There are three ways, in which a company may be wound up. They are :
- Winding up by the court.
- Voluntary winding up,
- Members Voluntary winding up.
- Creditors Voluntary winding up.
c. Winding up subject to supervision of the court
Winding up by The Court:
A company may be wound up by the court in following situations. Here, the court means "High Court".
- If the company itself, has passed a special resolution in the general meeting to wound up its affairs. Special resolution means, resolution passed by three-fourth (3/4") of the members present.
- If there is a default, in holding the statutory meeting or in delivering the statutory report to the Registrar.
A company which is limited by shares, and a company limited by guarantee having share capital, is required to hold a " Statutory meeting" of its members, within six months, and after one month, from the date of commencement of it's business. A statutory report of the meeting so held shall also be forwarded to the registrar. [ sec 165 (1) & (5)]
- If the company fails to commence it's business within one year from the date of it's incorporation, or suspends it's business for a whole year.
- If the number of members, in a public company is reduced to less than seven, and in case of private company less than two.
- If the company is unable to pay its debits; where the financial position of the company is, such, that it has more liabilities than assets, and after disposing off the assets, it is still unable to extinguish it's liabilities, it means that company is unable to pay it's debts.
- If the court, itself is of the opinion that the company should be wound up.
A company limited by shares, has to obtain a "certificate of commencement" of business from the registrar. Unless it obtains such certificate, it cannot carry on it's business operation.
The statutory requirement of minimum number of members in a public company is seven, and in case of private company, it is two (sec 12)
The court may form such an opinion, if it comes to the knowledge of court that, the company is mismanaged, or financially unsound, or carrying an illegal operations etc.