Page 339 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes 5. The order operates in the interests of all the creditors and all the contributories, no matter
who in fact asked for it (s.447).
6. The official liquidator, by virtue of his office becomes the liquidator of the company and
takes possession and control of the assets of the company (s.449).
7. All actions and suits against the company are stayed, unless the court gives leave to
continue or commence proceedings (s.446).
8. All the powers of the Board of directors cease and the same are then exercised by the
liquidator [Ss.491 & 505].

9. On the commencement of winding up, the limitation ceases to run in favour of the company.
10. Any disposition of the property of the company and any transfer of shares in the company
or alteration in the status of members made after the commencement of winding up shall,
unless the court otherwise orders, be void [s.536(2)].
11. Any attachment, distress or execution put in force, without leave of the court, against the
estate or effects of the company after the commencement of the winding up shall be void
[s.537 (a)] but not for dues payable to Government [s.537(2)].
12. Any sale held, without leave of the court, of any of the properties or effects of the company
after the commencement of winding up shall be void [s.537(b)].
13. Any floating charge created within 12 months preceding the commencement of winding
up is void unless it is proved that, the company after the creation of the charge was
solvent, except as to, any cash advanced at the time of or subsequent to the creation of the
charge or to any interest on that amount @ 5% or such other rate notified by the Central
Government (s.534).

Example: A company created a floating charge of its current assets in favour of a bank to
secure a current account, which was in debit of ` 5 lakhs and also to secure further working
capital facilities provided by the bank. The charge created on January 1, 2007 was duly registered
with ROC. The bank advanced ` 10 lakh subsequent to the creation of the charge. The company
has gone into creditors voluntary liquidation pursuant to a resolution passed on September 1,
2007. There is no case of a fraudulent preference.

As it is a creditors voluntary winding up, the floating charge is void being made within 12
months of winding up resolution, unless the charge is against cash advanced at the specified rate
of interest (s. 534).

Example: If in the above example, if it was a members’ voluntary winding up, then the
floating charge is valid.

Did u know? The secured creditor is outside the winding up and can realise his security
without the leave of the court.

Statement of affairs to be made to the liquidator (s.454): When a winding up order is made by
the court, the directors of the company must make to the liquidator a statement as to the affairs
of the company, stating the following particulars: (i) the debts and liabilities of the company; (ii)
the assets of the company, showing separately the cash in hand and in bank, if any; (iii) the name,
residence and occupation of each creditor stating separately the amount of secured debts and
unsecured debts; (iv) the debts due to the company and the name, residence and occupation of
each person from whom the sum is due and the amount likely to be realised therefrom.

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