Page 346 - DMGT407Corporate and Business Laws

Unit 14: Winding up and Dissolution of a Company

for voluntary winding up is to be proposed. Notice of this meeting has to be sent by post to the Notes
creditors simultaneously with the sending of the notices of the meeting of the company. Notice of
the meeting should also be advertised in the official gazette and in two newspapers circulating in
the district of the registered office or principal place of business of the company.
The Board of directors must prepare and lay before the meeting a statement of the position of the
company’s affairs, together with a list of its creditors and the estimated amounts of their claims.
Violation of s.500 is punishable with fine which may extend to ` 10,000.

Notice to the registrar: A copy of any resolution passed at the creditors’ meeting must be filed
with the Registrar within 10 days of the passing thereof. If default is made, then the company
and every guilty officer shall be punishable with fine which may extend to ` 500 for every day
of the default (s.501).
Appointment of liquidator (s.502): The creditors and the members at their respective first meetings
may nominate a person to be liquidator for the purpose of winding up the affairs and distributing
the assets of the company. If the creditor and the members nominate different persons, the
creditor’s nominee will as a rule be the liquidator. But any Director, member or creditor may
apply to the Court for an order that the company’s nominee or the official liquidator or some
other person should be appointed. If no person is nominated by the creditors, the members’
nominee shall be the liquidator. Vacancies in the office caused by death, resignation or otherwise
may be filled by creditors, except where the liquidator was originally appointed by or by the
direction of the Court, when the Court will on application fill the vacancy.

Committee of inspection (s.503): The creditors at their first or any subsequent meeting may, if
they think fit, appoint a committee of inspection of not more than five members. If such committee
is appointed, the company may, either at the meeting at which the winding up resolution is
passed, or at a later meeting, appoint five persons to serve on the committee. If the creditors
object against the persons appointed by the company, then the matter will be referred to the
Court for the final decision. The powers of such committee are the same, as those of a committee
of inspection appointed in a compulsory winding up.
Fixing of liquidator’s remuneration (s.504): The remuneration to be paid to the liquidator or
liquidators has to be fixed by the committee of inspection or if there is no much committee, by
the creditors. Where the remuneration is not so fixed, it must be determined by the Court. Any
remuneration once fixed shall not be increased in any circumstances, whatever, whether with or
without sanction of the court.
Board’s powers to cease on appointment of liquidator (s.505): On the appointment of liquidator,
all the powers of the Board of directors shall cease, except in so far as the committee of inspection,
or if there is no such committee, the creditors in general meeting, may sanction the continuance
thereof.
Duty of liquidator to call meeting of company and of creditors at the end of each year [s.508]: In
the event of the winding up continuing for more than one year, the liquidator must call a
general meeting of the company and a meeting of the creditors at the end of the first year, from
the commencement of the winding up and at the end of each succeeding year, or as soon thereafter
as may be convenient within 3 months from the end of the year or such longer period as the
Central Government may allow. Further, he may lay before the meeting an account of his acts
and dealings and of the conduct of winding up during the preceding year, together with a
statement in the prescribed form and containing the prescribed particulars with respect to the
proceedings and position of the winding up.
Final meeting and dissolution (s.509): As soon as the affairs of the company are fully wound up,
the liquidator must: (a) make up an account of the winding up, showing how the winding up has
been conducted and the property of the company has been disposed of; and (b) call a general

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