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Accounting for Companies – II

notes 9.2.1 compulsory Winding up

In the following circumstances, a company will be compulsorily wound up by the court:
(a) If the company has passed a special resolution to be wound up by court.

(b) If the company is in default to deliver the statutory report to the Registrar of Companies for
holding the statutory meeting.
(c) If the company does not commence its business within a year from the date of its
incorporation or suspends its business for a whole year.
(d) If the number of its member comes below seven and in case of a private company, below
two.
(e) If the company is not in a position to pay its debts.
(f) If the court is of the opinion that it is just and equitable that the company should be
wound up.

In compulsory winding up, any one of the following may file a petition: (1) the company, (2)
any creditor, (3) any contributory, (4) all or any of the above mentioned parties (5) the Registrar
(6) any person authorised by the Central Government. The Central Government authorises a
person to file the petition when it asks for the winding up of a company.

9.2.2 voluntary Winding up

Voluntary winding up may be two types: (a) Voluntary winding up by members (b) Voluntary
winding up by the creditors. In members’ voluntary winding up, the directors, or if there are more
than two directors, of them, at the meeting of Board of Directors, have to give a declaration of
the solvency of the company, verified by an affidavit. The declaration indicates that the company
has no debts or will be able to pay its debts in full within three years from the commencement
of winding up, as may be specified in the declaration. At the time of passing of resolution for
winding up in the general meeting, the company appoints one or more liquidators and also
fixes their remuneration. If the liquidator is of the opinion that the company is not in a position
to pay its debts in full within the period stated in the declaration, or the period will be over
without the payment of debts, he must call a meeting of the company at the end of first year of
the commencement of winding up and of each coming years, and should clear the position of his
acts and conduct regarding the winding up. Upon the completion of the affairs of the company
the liquidator must call a final meeting and lay down these accounts before the meeting. Within
one week from this meeting, a copy of these accounts must be dispatched to the Registrar of
Companies. After registering these accounts in the register by the Registrar, these accounts are
returned to the official liquidator. Then the official liquidator scrutinises these accounts and
reports to the court. Then the company is deemed to be dissolved from the date of submission
of this report.
If the declaration of solvency is not made by the directors at the meeting of Board and delivered
to the Registrar, it is presumed that the company is insolvent. In such a case, it is called creditors’
voluntary winding up. In this case, the company must call a meeting of its creditors for passing
the resolution for winding up. After passing the resolution of winding up in this meeting, a copy
of the resolution is dispatched to the Registrar within 10 days of the date on which the resolution
is passed. Members and creditors both appoint their liquidators in their meetings.

9.2.3 Winding up subject to supervision of court

It is a voluntary winding up of the company subject to the supervision of the court on any
terms or conditions and with all liberty for creditors, members or others to apply to the court.

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