winding up Flashcards
Winding Up
define
The process through which a company is dissolved, ending its existence. Also referred to as “liquidation” of the company.
During winding up, the company’s assets are sold off, debts are settled,
Modes of Winding Up
Winding up of a company can be done in three ways: a) by the Court, b) voluntarily, or c) subject to the supervision of the Court.
Circumstances for Court Winding Up
13 points
A company may be wound up by the Court under various circumstances, including:
Resolution for winding up by special resolution
Default in delivering statutory report or holding statutory meeting
Default in holding two consecutive annual general meetings
Default in filing financial statements for two consecutive years
Reduction of members below statutory limits
Inability to pay debts
Unlawful, fraudulent, or oppressive activities
Failure to maintain proper accounts or commit fraud
Failure to follow laws, regulations, or company documents
Just and equitable circumstances
Ceasing to have a member
Cessation of licensed activity
Non-compliance by non-profit company
Failure to complete winding up for licensed company
Suspension of business for a year by listed company
Process of Winding Up
The winding up process commences after a court order or a voluntary winding up resolution is passed. The company’s assets are sold, debts are paid, and any remaining surplus is distributed. The company is dissolved after the completion of winding up proceedings.
Company Dissolution
Upon completion of winding up, the company ceases to exist, and its legal existence is terminated.
Unlawful Activity Definition
Any scheme or business, described in any manner, shall be considered unlawful if it involves:
Accepting a deposit or contribution in cash or through coupons, certificates, tickets, etc.
Promising future payments, property, rights, or benefits based on chance or lottery.
Raising unauthorized deposits, engaging in referral marketing, multi-level marketing (MLM), Pyramid and Ponzi Schemes, locally or internationally.
Conducting any business activity against public policy or moral standards
Assured Payments Scheme
Any scheme where people deposit money and are promised future payments, property, or benefits, directly or indirectly, based on chance or lottery, is deemed unlawful.
Un-Authorized Deposits
Engaging in activities like raising unauthorized deposits from the public, referral marketing, multi-level marketing (MLM), Pyramid and Ponzi Schemes, whether nationally or internationally, is considered unlawful.
Commission Notification
regarding unlawful business activity
The Commission has the authority to designate any other business activity as unlawful if it goes against public policy or is deemed a moral hazard.
Inability to Pay Debts Definition
A company is considered unable to pay its debts if:
A creditor owed over Rs. 100,000 has issued a demand for payment.
The company neglects to pay or arrange payment within 30 days.
Execution of a court decree in favor of a creditor is unsatisfied.
The Court determines that the company cannot meet its debts.
The Court considers both current and potential liabilities.
Creditor Demand
unbility to pay debts
If a creditor, to whom the company owes more than Rs. 100,000, serves a written demand for payment by registered post or through an authorized agent, and the company doesn’t pay or provide security within 30 days, it’s deemed unable to pay debts.
Unsatisfied Execution
unability to pay debts
If a court decree or order in favor of a creditor is not satisfied, wholly or partially, it’s an indicator that the company cannot meet its debts.
Court’s Determination
regarding unability to pay debts
The Court can conclude that a company can’t pay its debts after considering the company’s financial condition, including potential and current liabilities.
Who may present the petition regarding petition for winding up
7 points
a) by the company; or
b) by any creditor or creditors (including any contingent or prospective creditor or creditors); or
c) by any contributory or contributories; or
d) by all or any of the aforesaid parties, together or separately; or
e) by the registrar; or
f) by the Commission; or
g) by a person authorised by the Commission in that behalf.
Petition by the Company
The Court will not entertain a petition for the winding up of a company by the company itself until the following conditions are met:
The company provides the particulars of its assets, liabilities, and business operations.
The company furnishes the required information in the prescribed manner.
The company includes details of any ongoing suits or legal proceedings against it in the petition.