Page 352 - DMGT407Corporate and Business Laws

Unit 14: Winding up and Dissolution of a Company

(4) If the official liquidator is appointed as liquidator, the remuneration to be paid to him shall Notes
be fixed by the court and shall be credited to the Central Government.
Notice by liquidator (s.516): Within 30 days after his appointment, the liquidator must publish
in the official gazette and deliver to the Registrar a notice of his appointment in the prescribed
form, otherwise a punishment of ` 500 for every day of default shall be attracted.

Self Assessment

Fill in the blanks:

10. For the purpose of filing Income Tax Return for the income earned during the winding up
it has been held that the ……………….will be regarded as principal officer of the company.
11. A Body Corporate cannot be appointed as a voluntary liquidator and any such appointment
would be ……………..
12. The Official Receiver attached to District Court for insolvency purposes shall be the
…………………… attached to the District Court.

14.5 Dissolution of Companies

A company is said to be dissolved when it ceases to exist as a corporate entity for all practical
purposes but it is not the extinction of the company. The company is kept, after dissolution, in
‘suspended animation’ for 2 years. The dissolution of a company may be declared by the court,
under s.559, within a period of two years from the date of dissolution. Thus, within a period of
2 years from the date of dissolution, the company can be revived by the court by declaring the
dissolution void. The court will do so at the application by the liquidator of the company or by
any other person who appears to the court to be interested in this [s.559 (1)]. It will be the duty
of the applicant to file a copy of the above order of the court, with the registrar, within 30 days
after the making of the order [s.559(2)].

Modes of Dissolution

Dissolution of a company may be brought about in any of the following three ways:
(1) In case of defunct companies: By removal of its name from the register of companies
(s.560): If the registrar has reason to believe that a company is not carrying on business, he
is empowered to adopt the procedure prescribed by s.560 and strike out the company’s
name from the register as being ‘defunct’. This may be done whether the company is a
going concern or in liquidation.

(2) In pursuance of amalgamation or reconstruction: By order of the Court without winding
up, i.e., where a reconstruction or amalgamation is being carried under s.394(b)(iv).
(3) In pursuance of the winding up of the company.

Dissolution of Defunct Companies (s.560)

A defunct company means a company which has never commenced business or which is not
carrying on business. Section 560 lays down the procedure for the dissolution of defunct
companies, without resorting to the winding up machinery. The procedure is as follows:

1. Where the registrar has reasonable cause to believe that a company is not carrying on
business or is not in operation, he shall send to the company by post a letter inquiring
whether the company is carrying on business or is in operation.

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