Winding_Up_Questions_Answers(1) Flashcards
Define the term �winding up� of a company.
- Winding up refers to the process by which a company is dissolved.
- Company’s life is brought to an end.
- Assets are disposed of, debts paid off, and surplus distributed among members.
- Process begins after a court order or resolution for voluntary winding up.
- Company ceases to exist upon completion.
What are the modes of winding up a company?
- By the Court.
- Voluntary.
- Subject to the supervision of the Court.
Who is a liquidator, and what are their roles?
- A liquidator is appointed to carry out the winding-up process.
- Official Liquidator: Appointed by the Court.
- Role includes disposing of assets, paying debts, and distributing surplus.
List the circumstances for winding up by the Court.
- Company resolves by special resolution to be wound up by the Court.
- Default in delivering statutory report or holding statutory meetings.
- Failure to hold two consecutive annual general meetings.
- Non-filing of financial statements or annual returns for two years.
- Reduction of members below required numbers (public: below 3, private: below 2).
- Company is unable to pay its debts.
- Engaged in unlawful or fraudulent activities.
- Business is oppressive to minority members.
- Management involved in fraud or misfeasance.
When is a company deemed unable to pay its debts?
- Creditor of over Rs. 100,000 serves notice, and company fails to pay within 30 days.
- Execution of a court order remains unsatisfied.
- Court determines inability considering contingent and prospective liabilities.
What constitutes unlawful activity for a company?
- Receiving deposits promising returns determined by chance (e.g., lottery schemes).
- Raising unauthorized deposits (e.g., referral marketing, MLM, pyramid schemes).
- Engaging in businesses notified by commission against public policy or morally hazardous.
Who can file an application/petition for winding up?
- Company: Must provide details of assets, liabilities, operations, and ongoing legal cases.
- Creditors: Provide security for costs and establish a prima facie case.
- Contributories: Eligible when membership reduces below required numbers.
- Registrar: Requires Commission�s sanction and allows the company representation.
- Commission: Investigates and finds unlawful/fraudulent business activities, oppression, or misconduct.
Commencement Of Winding Up By Court
Winding up by the Court commences at the time of the petition for winding up. | The petition determines the start of the legal process.
Other Modes of Winding Up
Voluntary winding up. | Winding up subject to supervision of the Court.
Circumstances of Voluntary Winding Up
Articles fix duration or event, and it occurs - resolution passed. | If no duration or event, special resolution is required.
Commencement of Voluntary Winding Up
Starts at the time of passing the resolution of winding up. | Liquidator is appointed by the company.
Winding Up Subject to Supervision of Court
Court oversees voluntary winding up on request of entitled persons or on its own. | Court may set terms and conditions for the winding-up process.
Conversion Into Winding Up by Court
Entitled persons may file a petition for winding up by Court. | Court makes the order if existing mode cannot continue with regard to creditors’ or public interest.
Who is a Liquidator?
A person appointed to carry out the winding up of a company. | For court-based winding up, the term is ‘official liquidator’.
Duties of a Liquidator
Realize company property and pay debts. | Distribute surplus among members. | Act under Court supervision with proper reporting.
Who is a Provisional Manager?
A person appointed by the Court to manage a company temporarily. | Preserves and controls company affairs until a winding-up decision is made.
Panel of Provisional Manager/Official Liquidator
Must have at least 10 years’ experience in accounting, finance, or law. | Commission maintains the panel and ensures competence.
Eligibility for Provisional Manager/Official Liquidator
Appointed from panel by the Court, max for 3 companies at a time. | Exceptions for creditor applications meeting criteria.
Declaration by Official Liquidator
Must file a declaration of no conflict of interest within 7 days. | Follow specified code of conduct and requirements.
Statement of Affairs Requirement
Includes details on assets, liabilities, cash, creditors, and pending suits. | Prepared and verified by affidavit within 15-45 days of relevant date.
Report by Official Liquidator
Details on assets, liabilities, contracts, trademarks, and legal cases. | Reports fraud, viability, and maximization of assets. | Submitted within 60 days of the winding-up order.
