The Liquidation or winding up a company is a process through which life of company and it’s all affairs are wound up and its property administered for benefits of its creditors and members. An administrator, who is called liquidator, is appoint to take control of company, collect its assents, pay its debts and finally if any surplus assents are left, they are divided among the members of the company in proportion to their rights under the articles. This being done the company is dissolved on compliance within the requisite formalities prescribed by the companies’ ordinance.
Different modes of winding up a Company
According to Section 297 of ordinance these are the following modes of winding up a company.
1. Winding up by the Court
A company formed and registered under the ordinance, may be wound up by the court. This kind of winding up is also called compulsory winding up.
Explanation of winding up a company by Court
Following points are important to explanation
i. Special Resolution
As far as winding up of company by court is concerned, company can wound up only when company has passed special resolution for its winding up and court orders for its winding up on basis of some specific grounds.
If it is conducting its business in a manner oppressive to any member or person concerned with the formation or minority share-holders.
iii. Inability to pay debts
When is it’s proved that public company is unable to pay its debts, court can order for its winding up.
iv. Unauthorized business
If it is carrying on business not authorized by the memorandum.
v. Non-maintenances of accounts
If company fails to maintain its accounts, court can order for its winding up.
vi. Non-holding of Statutory Meeting
When statutory meeting is not held within prescribed period, court can order for winding up of company.
vii. Non-submission of Statutory Report
When statutory report is not submitted to registrar, court can order for winding up of company.
viii. Failure to commence or suspend business
If the company does not commence its business within a year from its incorporation or suspends the business for a whole years.
ix. Reduction of members
If the number of member is reduced in the case of a public company, below seven and in the case of a private company, below two.
x. Failure to carryout directions
If it is managed by person who fail to carry out the directions of the court or Registrar or commission.
2. Voluntary winding up a Company
The object of a voluntary winding is that the company and its creditors shall be left to settle their affairs without going to Court, but they may apply to the court for any directions and order if and when necessary.
Explanation voluntary winding up a company
Following are the points are important to explanation
i. Expiry of period
When the period if any fixed for the duration of the company expires.
ii. Occurrence of events
When the event occurs, on the occurrence of which the articles provide that the company is to be dissolved and the company has passed a resolution to winding up.
iii. Special Resolution
If the company by a special resolution resolves that the company be wound up voluntarily for any reason whatsoever.
iv. Extraordinary Resolution
When the company has passed an extra-ordinary resolution that it cannot by reason of its liabilities carry on its business, and that it is expedient that the company be wound up.
3. Winding up a company under supervision of court
When company has passed special or extra-ordinary resolution for its liquidation or winding up, court can pass an order on application of creditors, contributors or other persons for conducting of liquidation or winding up of company under supervision of court.
Explanation of winding up a company under supervision of court
As far as winding up a company under supervision of court is concerned, all proceedings for winding up of company are though conducted voluntarily, yet it is necessary that these proceedings should be conducted under supervision of court.
I say include that bankruptcy of company is not the same thing as winding up a company. There is difference between bankruptcy of company and winding up of company in bankruptcy of company, court appoints a trustee to sell property to pay the debts of the bankrupt party. Contrary to this, liquidator fulfills prescribed procedure for winding up of company.