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vustudents
08-28-2012, 05:57 PM
Q. Under what circumstances a company may be wound up voluntarily? what does
winding up commence and what are its consequences?
(1997) (2000) (2002) (2004) (2005) (2006/A)
1.Q. Under what circumstances a company may be wound up voluntarily? what does Introduction:
By winding up a company is meant the end of the life of a company. a company is an artificial person. the termination of its existence is affected by law. the winding up of a company is a legal procedure in which all the affairs of the company are wound up. it is permanent closing down of the business of the company its assets and liabilities are determined asserts are sold out and clams of the creditors met out of sale proceeds. the balance if any, is distributed among the shareholders in proportionate to their shares.
2. Definition:
When a company ceases to exist and its property is administrated for the benefits of its creditors and member, it is called winding up.
3. Modes of winding up:
According to the companies ordinance 1984 a company can be wound up by the following three ways.
(i) Compulsory winding up by the court.
(ii) Voluntary winding up.
(iii) Winding up under the supervision of the court.
4. Voluntary winding up:
It has two kinds:
I Member voluntary winding up.
II Creditors voluntary winding up.
I Member voluntary winding up:
In case of member voluntary up, the directors in the meeting of the shareholders the company is liable for liquidation. the meeting than passes a resolution for voluntary winding up and appoint a official liquidator.
A. Circumstances when voluntary winding up take place by the members themselves:
Voluntary winding up takes place in the following circumstances by the member, themselves.
(i) Expiry of period:
If the period fixed for the duration of the company in the articles has expired the company may wound up voluntraily by passing a resolution in the general meeting.
(ii) By special resolution:
Voluntary winding up of a company takes place by passing a special resolution by the members of the company.
(iii) Statutory declaration:
The majority of the directors make a statutory declaration to the registrar of the companies that company.
(i) Has no debt or
(ii) Is able to pay it debt in full within a period not exceeding on year form the commencement of winding up.
(iv) Appointment of liquidator:
In the general meeting the shareholders of the company appoint the liquidator to wind up the affairs of the company. assets of the company are also distributed by the liquidators. the shareholders of the company also fix the remuneration of the liquidators.
(v) Final meeting:
After winding up the affairs of the company, the liquidators calls the general meeting of the shareholder. the full account of the company is placed in the meeting by the liquidators.
(vi) Dissolution:
The liquidators within one week of the meeting sends the copy of full account to the registrar. the company shall be dissolved on the expiration of three months on the receipt of the copy of the accounts.
II Creditors voluntary winding up:
(i) Meaning:
A winding up in the case of which a declaration of insolvency has not been delivered to the registrar is called creditors voluntary winding up.
(ii) Procedure:
The company calls a meeting of its creditors and appoints a liquidator. when the liquidation is complete, the liquidator calls the final meeting of the company creditors and place the full account before them. A copy of report is also sent to the registrar of the companies. the registrar on receiving the accounts and the others documents takes action of dissolution of the company.
(iii) Dissolution:
After three months of receiving the copy of accounts of the company it is dissolved.
5. Consequences of winding up:
Consequences of winding up are as under.
(i) As to assets of the company:
The assets of the company shall be taken into possession on the liquidation or winding up of the company.
(ii) As to shares:
Transfer of share after the winding up of the company is void.
(iii) As to shareholders:
Every shareholder is liable to contribute his assets.
(iv) As to members:
Alternation in the status of a member after the winding up of a company is void.
(v) As to the creditors:
If the company is being wound up as insolvent the rules of insolvency apply. but if a solvent company is being wound up all debts and claims against the company are admissible to prove against the company.
(vi) As to servants:
All servants of the company stand dismissed with winding up of the company.
(vii) As to officers:
The powers of the directors usually cease on winding up of the company.
(viii) As to proceeding against the company:
No suit or other proceeding against the company can continue except with the leave of the court.
(ix) As to costs:
Costs for litigation during winding up and all costs, changes and expenses properly incurred in the winding up are payable out of the assets of the company.
6. Commencement of voluntary winding up:
Voluntary winding up of company can be took place in two ways.
(a) By ordinary resolution.
(b) By special resolution the voluntary winding up commences at the time of the passing of the resolution authorising it,
7. Conclusion:
To conclude I can say that, the winding up of a company means end of the company. it is proceeding under the companies ordinance 1984, in which all affairs are wound up companies ordinance lay down. three different methods to wind up the business of company. a company may be wind up voluntarily in the two ways by ordinary resolution of members of the company which may take place at any time. the effects of winding up of a company are different in nature.