Page 347 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes meeting of the company and a meeting of the creditors for the purpose of laying the account
before the meeting and giving any explanation thereof.
Each such meeting must be called by advertisement and must specify the time, place and objects
thereof and must be published at least one month before the meeting in the official gazette and
also in some newspaper circulating in the district where the registered office of the company is
situated.
Within one week after the date of the meetings, the liquidator shall send to the Registrar and the
official liquidator a copy of the account and a return of the meeting held [s.509 (3)].
The official liquidator, after scrutiny of the books and papers of the company, shall make a
report to the court. If this report states that the affairs of the company have not been conducted
in a manner prejudicial to the interest of the company or public then from the date of the
submission of the report the company shall be deemed to be dissolved; otherwise the court will
ask official liquidator to make further investigation and may, after that report, order that the
company shall stand dissolved from the specified date [s. 509 (6)].

Notes Distinction between Members’ Voluntary Winding up and Creditor’s Voluntary
Winding up:
1. Members’ voluntary winding up can be resorted to by solvent companies and thus
requires the filing of a ‘declaration of solvency’ by the directors of the company
with the Registrar; creditors’ winding up, on the other hand, is resorted to by insolvent
companies.
2. In members’ voluntary winding up there is no need to have creditor’s meeting. But
in the case of creditors’ voluntary winding up, a meeting of the creditors must be
called immediately after the meeting of the members.
3. Liquidator, in the case of members’ winding up is appointed by the members. But in
the case of creditors’ voluntary winding up, if the members and creditors nominate
two different persons as liquidators, creditors’ nominee shall become the liquidator.
4. In the case of creditor’s voluntary winding up, if the creditors so wish a ‘Committee
of Inspection’ may be appointed. In the case of members’ voluntary winding up,
there is no provision for any such committee.
Voluntary Winding up under Supervision of the Court

At any time after a company has passed a resolution for voluntary winding up, the court may
make an order that the voluntary winding up should continue subject to the supervision of the
court (Section 522). Application for such supervision order may be made either by a creditor, a
contributory, the company, or the liquidator.
One advantage of having a supervision order is that the liquidator is allowed to occupy the same
position and exercise the same power (subject to restrictions where necessary) as a voluntary
liquidator. At the same time the advantage of a compulsory winding up as regards stay of suits
and other proceedings and making and enforcing calls etc. are also secured and the court is
empowered to exercise all the powers which it can exercise in a compulsory winding up. In
truth, a supervision order is an amalgam of both—a voluntary winding up and a winding up by
court as it is made on such terms and conditions as the court thinks just. Such an order is passed
by the court under the following circumstances:
1. The resolution for winding up was obtained by fraud, or

340 LOVELY PROFESSIONAL UNIVERSITY