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PART II.—Voluntary winding up 304.Circumstances
in which
company may
be wound up
voluntarily.
A company may be wound up voluntarily,—
(a) if the company in general meeting passes a resolution requiring the company
to be wound up voluntarily as a result of the expiry of the period for its duration, if any,
fixed by its articles or on the occurrence of any event in respect of which the articles
provide that the company should be dissolved; or
(b) if the company passes a special resolution that the company be wound up
voluntarily.
305.Meeting of
creditors.
Appeals from
orders made
before
commencement
of Act.
Circumstances
in which
company may
be wound up
voluntarily.
(1) Where it is proposed to wind up a company voluntarily, its director or directors,
or in case the company has more than two directors, the majority of its directors, shall, at a
meeting of the Board, make a declaration verified by an affidavit to the effect that they have
made a full inquiry into the affairs of the company and they have formed an opinion that the
company has no debt or whether it will be able to pay its debts in full from the proceeds of
assets sold in voluntary winding up.
(2) A declaration made under sub-section (1) shall have no effect for the purposes of
this Act, unless—
(a) it is made within five weeks immediately preceding the date of the passing of
the resolution for winding up the company and it is delivered to the Registrar for
registration before that date;
(b) it contains a declaration that the company is not being wound up to defraud
any person or persons;
(c) it is accompanied by a copy of the report of the auditors of the company
prepared in accordance with the provisions of this Act, on the profit and loss account
of the company for the period commencing from the date up to which the last such
account was prepared and ending with the latest practicable date immediately before
the making of the declaration and the balance sheet of the company made out as on
that date which would also contain a statement of the assets and liabilities of the
company on that date; and
(d) where there are any assets of the company, it is accompanied by a report of
the valuation of the assets of the company prepared by a registered valuer.
(3) Where the company is wound up in pursuance of a resolution passed within a
period of five weeks after the making of the declaration, but its debts are not paid or provided
for in full, it shall be presumed, until the contrary is shown, that the director or directors did
not have reasonable grounds for his or their opinion under sub-section (1).
(4) Any director of a company making a declaration under this section without having
reasonable grounds for the opinion that the company will be able to pay its debts in full from
the proceeds of assets sold in voluntary winding up shall be punishable with imprisonment
for a term which shall not be less than three years but which may extend to five years or with
fine which shall not be less than fifty thousand rupees but which may extend to three lakh
rupees, or with both.
306.Meeting of
creditors. (1) The company shall along with the calling of meeting of the company at which
the resolution for the voluntary winding up is to be proposed, cause a meeting of its creditors
either on the same day or on the next day and shall cause a notice of such meeting to be sent
by registered post to the creditors with the notice of the meeting of the company under
section 304.
(2) The Board of Directors of the company shall—
(a) cause to be presented a full statement of the position of the affairs of the
company together with a list of creditors of the company, if any, copy of declaration
under section 305 and the estimated amount of the claims before such meeting; and
(b) appoint one of the directors to preside at the meeting.
(3) Where two-thirds in value of creditors of the company are of the opinion that—
(a) it is in the interest of all parties that the company be wound up voluntarily,
the company shall be wound up voluntarily; or
(b) the company may not be able to pay for its debts in full from the proceeds of
assets sold in voluntary winding up and pass a resolution that it shall be in the interest
of all parties if the company is wound up by the Tribunal in accordance with the
provisions of Part I of this Chapter, the company shall within fourteen days thereafter
file an application before the Tribunal.
(4) The notice of any resolution passed at a meeting of creditors in pursuance of this
section shall be given by the company to the Registrar within ten days of the passing
thereof.
(5) If a company contravenes the provisions of this section, the company shall be
punishable with fine which shall not be less than fifty thousand rupees but which may
extend to two lakh rupees and the director of the company who is in default shall be punishable
with imprisonment for a term which may extend to six months or with fine which shall not be
less than fifty thousand rupees but which may extend to two lakh rupees, or with both.
307.Publication
of resolution
to wind up
voluntarily.
(1) Where a company has passed a resolution for voluntary winding up and a
resolution under sub-section (3) of section 306 is passed, it shall within fourteen days of the
passing of the resolution give notice of the resolution by advertisement in the Official
Gazette and also in a newspaper which is in circulation in the district where the registered
office or the principal office of the company is situate.
(2) If a company contravenes the provisions of sub-section (1), the company and
every officer of the company who is in default shall be punishable with fine which may
extend to five thousand rupees for every day during which such default continues.
308.Commencement
of voluntary
winding up.
A voluntary winding up shall be deemed to commence on the date of passing of
the resolution for voluntary winding up under section 304.
309.Appointment
of Company
Liquidator.
In the case of a voluntary winding up, the company shall from the commencement
of the winding up cease to carry on its business except as far as required for the beneficial
winding up of its business:
Provided that the corporate state and corporate powers of the company shall continue
until it is dissolved.
310.Effect of
voluntary
winding up.
(1) The company in its general meeting, where a resolution of voluntary winding
up is passed, shall appoint a Company Liquidator from the panel prepared by the Central
Government for the purpose of winding up its affairs and distributing the assets of the
company and recommend the fee to be paid to the Company Liquidator.
(2) Where the creditors have passed a resolution for winding up the company under
sub-section (3) of section 306, the appointment of the Company Liquidator under this section
shall be effective only after it is approved by the majority of creditors in value of the company:
Provided that where such creditors do not approve the appointment of such Company
Liquidator, creditors shall appoint another Company Liquidator.
(3) The creditors while approving the appointment of Company Liquidator appointed
by the company or appointing the Company Liquidator of their own choice, as the case may
be, pass suitable resolution with regard to the fee of the Company Liquidator.
(4) On appointment as Company Liquidator, such liquidator shall file a declaration in
the prescribed form within seven days of the date of appointment disclosing conflict of
interest or lack of independence in respect of his appointment, if any, with the company and
the creditors and such obligation shall continue throughout the term of his or its appointment.
311.Power to
remove and
fill vacancy
of Company
Liquidator.
(1) A Company Liquidator appointed under section 310 may be removed by the
company where his appointment has been made by the company and, by the creditors,
where the appointment is approved or made by such creditors.
(2) Where a Company Liquidator is sought to be removed under this section, he shall
be given a notice in writing stating the grounds of removal from his office by the company or
the creditors, as the case may be.
(3) Where three-fourth members of the company or three-fourth of creditors in value,
as the case may be, after consideration of the reply, if any, filed by the Company Liquidator,
in their meeting decide to remove the Company Liquidator, he shall vacate his office.
(4) If a vacancy occurs by death, resignation, removal or otherwise in the office of any
Company Liquidator appointed under section 310, the company or the creditors, as the case
may be, fill the vacancy in the manner specified in that section.
312.Notice of
appointment
of Company
Liquidator to
be given to
Registrar.
(1) The company shall give notice to the Registrar of the appointment of a
Company Liquidator along with the name and particulars of the Company Liquidator, of
every vacancy occurring in the office of Company Liquidator, and of the name of the Company
Liquidator appointed to fill every such vacancy within ten days of such appointment or the
occurrence of such vacancy.
(2) If a company contravenes the provisions of sub-section (1), the company and
every officer of the company who is in default shall be punishable with fine which may
extend to five hundred rupees for every day during which such default continues.
313.Cesser of
Board's
powers on
appointment
of Company
Liquidator.
On the appointment of a Company Liquidator, all the powers of the Board of
Directors and of the managing or whole-time directors and manager, if any, shall cease,
except for the purpose of giving notice of such appointment of the Company Liquidator to
the Registrar.
314.Powers and
duties of
Company
Liquidator in
voluntary
winding up.
(1) The Company Liquidator shall perform such functions and discharge such
duties as may be determined from time to time by the company or the creditors, as the case
may be.
(2) The Company Liquidator shall settle the list of contributories, which shall be
prima facie evidence of the liability of the persons named therein to be contributories.
(3) The Company Liquidator shall call general meetings of the company for the purpose
of obtaining the sanction of the company by ordinary or special resolution, as the case may
require, or for any other purpose he may consider necessary.
(4) The Company Liquidator shall maintain regular and proper books of account in
such form and in such manner as may be prescribed and the members and creditors and any
officer authorised by the Central Government may inspect such books of account.
(5) The Company Liquidator shall prepare quarterly statement of accounts in such
form and manner as may be prescribed and file such statement of accounts duly audited
within thirty days from the close of each quarter with the Registrar, failing which the Company
Liquidator shall be punishable with fine which may extend to five thousand rupees for every
day during which the failure continues.
(6) The Company Liquidator shall pay the debts of the company and shall adjust the
rights of the contributories among themselves.
(7) The Company Liquidator shall observe due care and diligence in the discharge of
his duties.
(8) If the Company Liquidator fails to comply with the provisions of this section except
sub-section (5) he shall be punishable with fine which may extend to ten lakh rupees.
315.Appointment
of
committees.
Where there are no creditors of a company, such company in its general meeting
and, where a meeting of creditors is held under section 306, such creditors, as the case may
be, may appoint such committees as considered appropriate to supervise the voluntary
liquidation and assist the Company Liquidator in discharging his or its functions.
316.Company
Liquidator to
submit report
on progress
of winding
up.
(1) The Company Liquidator shall report quarterly on the progress of winding up
of the company in such form and in such manner as may be prescribed to the members and
creditors and shall also call a meeting of the members and the creditors as and when necessary
but at least one meeting each of creditors and members in every quarter and apprise them of
the progress of the winding up of the company in such form and in such manner as may be
prescribed.
(2) If the Company Liquidator fails to comply with the provisions of sub-section (1), he
shall be punishable, in respect of each such failure, with fine which may extend to ten lakh
rupees.
317.Report of
Company
Liquidator to
Tribunal for
examination
of persons.
(1) Where the Company Liquidator is of the opinion that a fraud has been committed
by any person in respect of the company, he shall immediately make a report to the Tribunal
and the Tribunal shall, without prejudice to the process of winding up, order for investigation
under section 210 and on consideration of the report of such investigation, the Tribunal may
pass such order and give such directions under this Chapter as it may consider necessary
including the direction that such person shall attend before the Tribunal on a day appointed
by it for that purpose and be examined as to the promotion or formation or the conduct of the
business of the company or as to his conduct and dealings as officer thereof or otherwise.
(2) The provisions of section 300 shall mutatis mutandis apply in relation to any
examination directed under sub-section (1).
318.Final meeting
and
dissolution of
company.
(1) As soon as the affairs of a company are fully wound up, the Company
Liquidator shall prepare a report of the winding up showing that the property and assets of
the company have been disposed of and its debt fully discharged or discharged to the
satisfaction of the creditors and thereafter call a general meeting of the company for the
purpose of laying the final winding up accounts before it and giving any explanation therefor.
(2) The meeting referred to in sub-section (1) shall be called by the Company Liquidator
in such form and manner as may be prescribed.
(3) If the majority of the members of the company after considering the report of the
Company Liquidator are satisfied that the company shall be wound up, they may pass a
resolution for its dissolution.
(4) Within two weeks after the meeting, the Company Liquidator shall—
(a) send to the Registrar—
(i) a copy of the final winding up accounts of the company and shall make
a return in respect of each meeting and of the date thereof; and
(ii) copies of the resolutions passed in the meetings; and
(b) file an application along with his report under sub-section (1) in such manner
as may be prescribed along with the books and papers of the company relating to the
winding up, before the Tribunal for passing an order of dissolution of the company.
(5) If the Tribunal is satisfied, after considering the report of the Company
Liquidator that the process of winding up has been just and fair, the Tribunal shall pass an
order dissolving the company within sixty days of the receipt of the application under
sub-section (4).
(6) The Company Liquidator shall file a copy of the order under sub-section (5) with
the Registrar within thirty days.
(7) The Registrar, on receiving the copy of the order passed by the Tribunal under subsection
(5), shall forthwith publish a notice in the Official Gazette that the company is
dissolved.
(8) If the Company Liquidator fails to comply with the provisions of this section, he
shall be punishable with fine which may extend to one lakh rupees.
319.Power of
Company
Liquidator to
accept shares,
etc., as
consideration
for sale of
property of
company.
(1) Where a company (the transferor company) is proposed to be, or is in the
course of being, wound up voluntarily and the whole or any part of its business or property
is proposed to be transferred or sold to another company (the transferee company), the
Company Liquidator of the transferor company may, with the sanction of a special resolution
of the company conferring on him either a general authority or an authority in respect of any
particular arrangement,—
(a) receive, by way of compensation wholly or in part for the transfer or sale of
shares, policies, or other like interest in the transferee company, for distribution among
the members of the transferor company; or
(b) enter into any other arrangement whereby the members of the transferor
company may, in lieu of receiving cash, shares, policies or other like interest or in
addition thereto, participate in the profits of, or receive any other benefit from, the
transferee company:
Provided that no such arrangement shall be entered into without the consent of the
secured creditors.
(2) Any transfer, sale or other arrangement in pursuance of this section shall be binding
on the members of the transferor company.
(3) Any member of the transferor company who did not vote in favour of the special
resolution and expresses his dissent therefrom in writing addressed to the Company Liquidator,
and left at the registered office of the company within seven days after the passing of the
resolution, may require the liquidator either—
(a) to abstain from carrying the resolution into effect; or
(b) to purchase his interest at a price to be determined by agreement or the
registered valuer.
(4) If the Company Liquidator elects to purchase the member’s interest, the purchase
money, raised by him in such manner as may be determined by a special resolution, shall be
paid before the company is dissolved.
320.Distribution
of property
of company.
Subject to the provisions of this Act as to overriding preferential payments under
section 326, the assets of a company shall, on its winding up, be applied in satisfaction of its
liabilities pari passu and, subject to such application, shall, unless the articles otherwise
provide, be distributed among the members according to their rights and interests in the
company.
321.Arrangement
when binding
on company
and creditors.
(1) Any arrangement other than the arrangement referred to in section 319 entered
into between the company which is about to be, or is in the course of being wound up and its
creditors shall be binding on the company and on the creditors if it is sanctioned by a special
resolution of the company and acceded to by the creditors who hold three-fourths in value
of the total amount due to all the creditors of the company.
(2) Any creditor or contributory may, within three weeks from the completion of the
arrangement, apply to the Tribunal and the Tribunal may thereupon amend, vary, confirm or
set aside the arrangement.
322.Power to
apply to
Tribunal to
have
questions
determined,
etc.
(1) The Company Liquidator or any contributory or creditor may apply to the
Tribunal—
(a) to determine any question arising in the course of the winding up of a
company; or
(b) to exercise as respects the enforcing of calls, the staying of proceedings or
any other matter, all or any of the powers which the Tribunal might exercise if the
company were being wound up by the Tribunal.
(2) The Company Liquidator or any creditor or contributory may apply to the Tribunal
for an order setting aside any attachment, distress or execution put into force against the
estate or effects of the company after the commencement of the winding up.
(3) The Tribunal, if satisfied on an application under sub-section (1) or sub-section (2)
that the determination of the question or the required exercise of power or the order applied
for will be just and fair, may allow the application on such terms and conditions as it thinks fit
or may make such other order on the application as it thinks fit.
(4) A copy of an order staying the proceedings in the winding up, made under this
section, shall forthwith be forwarded by the company, or otherwise as may be prescribed, to
the Registrar, who shall make a minute of the order in his books relating to the company.
323.Costs of
voluntary
winding up.
All costs, charges and expenses properly incurred in the winding up, including
the fee of the Company Liquidator, shall, subject to the rights of secured creditors, if any, be
payable out of the assets of the company in priority to all other claims.
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