Unit 5 Introduction of Winding up of the company.pdf

Unit 5 Introduction of Winding up of the company.pdf

• 1.
  Unit 5: WindingUp of the Company Dr.Bharath V
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  Introduction • Winding upmeans the termination (closure) of a company’s legal existence. • The company’s assets are sold, liabilities are paid off, and any surplus is distributed among shareholders.
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  Types / Modesof Winding Up • Compulsory Winding Up (by Court / Tribunal) Ordered by the Court when: • Company passes a special resolution for winding up. • Fails to deliver statutory report. • Doesn’t start business within a year. • Members fall below the statutory minimum (7 public / 2 private). • Unable to pay debts. • Court finds it “just and equitable” to wind up.
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  2. Voluntary WindingUp Initiated by company itself through a resolution. 2.(a) Members’ Voluntary Winding Up • Company is solvent (able to pay debts). • Directors file a Declaration of Solvency. 3.(b) Creditors’ Voluntary Winding Up • Company is insolvent (cannot pay debts). • Meeting of creditors is held to appoint the liquidator.
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  Winding Up underSupervision of Court • When voluntary winding up continues under court supervision to protect creditors’ or contributories’ interests.
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  Liquidator • A Liquidatoris a person appointed to conduct the winding-up process: • Court Liquidator → in compulsory winding up. • Members / Creditors’ Appointed Liquidator → in voluntary winding up. • Duties: realize assets, pay liabilities, prepare final statement.
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  PROCEDURE FOR WINDINGUP Petition Filed for winding up of a Company Statement of Affairs of the Company Advertisement Appointment of Provisional Liquidator Send notice to the Provisional Liquidator Winding up Order Custody of Property Affairs of the company Dissolving the company
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  • In caseof Voluntary Winding up: Passing resolution and Special Resolution Declaration of Solvency Preparation of Winding up Report Application to Tribunal
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  Contributories (Sec. 428) •Persons (present or past members) liable to contribute to company’s assets in case of winding up Includes even fully paid-up shareholders (for adjustment of rights). • According to section 428 of the Companies Act, a contributory is “ Every person liable to contribute to the assets of a company in the event of its being wound up, and includes the holder of any shares which are fully paid up and also any person alleged to be a contributory.
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  Preferential Payments (Sec.530) Certain payments are made in priority to others: 1.Government dues (taxes, cases within 12 months). 2.Employee wages/salaries (up to 4 months). 3.Workmen’s compensation (max ₹20,000 each). 4.Accrued holiday pay. 5.Employees’ State Insurance dues. 6.Workmen’s compensation under 1923 Act. 7.Dues to PF / Pension / Gratuity funds. 8.Investigation expenses under Sec. 235/237. If insufficient funds → distributed proportionally.
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  Liquidator’s Final Statementof Account Shows how the assets realized were applied to settle liabilities and pay shareholders. • Order of Payments: 1.Secured creditors 2.Legal & liquidation expenses 3.Liquidator’s remuneration 4.Debenture holders (floating charge) 5.Preferential creditors 6.Unsecured creditors 7.Calls in advance 8.Preference dividends (arrears) 9.Preference share capital 10.Equity share capital
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  Proforma of Liquidator’sfinal statement of account Receipts (₹) Payments (₹) Cash in Hand xxx Secured Creditors xxx Cash at Bank xxx Legal Charges (including liquidation expenses) xxx Assets Realised: Liquidator’s Remuneration xxx Marketable Securities xxx Other Expenses on Liquidation xxx Bills Receivable xxx Debenture Holders: Trade Debtors xxx Outstanding Interest on Debentures xxx Loans and Advances xxx Debentures xxx Stock in Trade xxx Preferential Creditors xxx Work in Progress xxx Unsecured Creditors xxx Land & Building xxx Calls in Advance (if any) xxx Plant & Machinery xxx Arrears of Dividend on Cumulative Preference Shares xxx Furniture and Fixtures xxx Preference Shareholders xxx Patents, Trade Marks, etc. xxx Equity Shareholders xxx Investments, etc. xxx Surplus Realised from Secured Creditors (if any) xxx Calls in Arrears xxx Amount Received from Calls on Shares xxx Total xxx Total xxx