Page 343 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes
resolution for voluntary winding up, a petition is presented for winding up by the
court (s.441).
2. The company, from the commencement of winding up, must cease to carry on its
business except so far as may be required to secure a beneficial winding up, although
the corporate state and powers of the company continue until final dissolution
(s.487).
3. All transfer of shares and alterations in the status of members, made after the
commencement, are void unless sanctioned by the liquidator (s.536).

4. A resolution to wind up voluntarily operates as notice of discharge to the employees
of the company [Fowler vs. Commercial Times Co.] except: (a) when the liquidation
is only with a view to ‘reconstruction’ [Midland Counties Bank Ltd. vs. Attwood
(1905) 1 Ch. 357] or (b) when business is continued by the liquidator for the beneficial
winding up of the company.
5. On the appointment of the liquidator, all the powers of the Board of directors,
managing director or ‘manager’ shall cease except (s.491): (a) for the purpose of
giving notice to the Registrar about the name of the liquidator appointed, or
(b) insofar as the company in general meeting or the liquidator may sanction the
continuance of their powers.

14.2.6 Types of Voluntary Winding up

Voluntary winding up may be of three types: (a) Members’ Voluntary winding up; (b) Creditors’
Voluntary winding up; (c) Voluntary winding up under supervision of court.

Members’ Voluntary Winding up

Members’ Voluntary winding up is possible only when the company is solvent and is able to
pay its liabilities in full. Following are the important provisions regarding members’ voluntary
winding up.
1. Declaration of solvency (s.488): Where it is proposed to wind up a company voluntarily,
its directors, or in case the company has more than two directors, the majority of the
directors, may at a meeting of the Board, make a declaration verified by an affidavit, to the
effect that they have made a full enquiry into the affairs of the company and that having
done so, they have formed the opinion that the company has no debts, or that it will be
able to pay its debts in full within such period not exceeding 3 years from the commencement
of the winding up as may be specified in the declaration. In order to be effective, this
declaration must be: (i) made within five weeks immediately preceding the date of passing
of the winding up resolution by the members; (ii) delivered to the Registrar for filing
before the said date; (iii) accompanied by a copy of the report of the auditors of the
company on the profit and loss account prepared since the date of the last account and the
balance-sheet of the company made out as on the last mentioned date and also embodies
a statement of the company’s assets and liabilities as at that date.
Any director of a company making a declaration under this section without having
reasonable grounds for the opinion that the company will be able to pay its debts in full
within the period specified in the declaration, shall be punishable with imprisonment for
a term which may extend to six-months, or with fine up to ` 5,000 or with both. If the
company is wound up in pursuance of a resolution passed within the period of five weeks
after making the declaration, but its debts are not paid or provided for in full within the

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