How a company may be wound up voluntarily
Under what circumstances a company may be wound up voluntarily? what does winding up commence and what are its consequences?
Introduction:
Winding up a company means 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 the permanent closing down of the business of the company its assets and liabilities are determined asserts be sold out and claims of the creditors are 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 benefit of its creditors and members, 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.
Compulsory winding up by the court.
Voluntary winding up.
Winding up under the supervision of the court.
4. Voluntary winding up:
It has two kinds:
- Member voluntary winding up.
- Creditors voluntary winding up.
1. Member voluntary winding up:
In the case of member voluntary up, the directors in the meeting of the shareholders of the company are liable for liquidation. the meeting then passes a resolution for voluntary winding up and appoints an official liquidator.
Voluntary winding up takes place in the following circumstances by the member, themselves.
(i) Special resolution:
The voluntary winding up of a company takes place by passing a special resolution by the members of the company.
(ii) 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.
(iii) Final meeting:
After winding up the affairs of the company, the liquidators call the general meeting of the shareholders. the full account of the company is placed in the meeting by the liquidators.
(iv) Expiry of period:
If the period fixed for the duration of the company in the articles has expired the company may wound up voluntarily by passing a resolution in the general meeting.
(v) Dissolution:
The liquidators within one week of the meeting send a copy of the 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.
(vi) 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) Can pay it debt in full within a period not exceeding one year form the commencement of winding up.
2. Creditors voluntary winding up:
(i) Meaning:
A winding up in a case in which a declaration of insolvency has not been delivered to the registrar is called creditor 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 places the full account before them. A copy of the report is also sent to the registrar of the companies. the registrar on receiving the accounts and the other documents takes action of dissolution of the company.
(iii) Dissolution:
After three months of receiving the copy of the accounts of the company, it is dissolved.
5. Consequences of winding up:
The consequences of winding up are as under.
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.
As to officers:
The powers of the directors usually cease on winding up of the company.
As to members:
Alternation in the status of a member after the winding up of a company is void.
As to proceeding against the company:
No suit or other proceeding against the company can continue except with the leave of the court.
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.
As to shares:
Transfer of shares after the winding up of the company is void.
As to shareholders:
Every shareholder is liable to contribute his assets.
As to servants:
All servants of the company stand dismissed with the winding up of the company.
As to costs:
Costs for litigation during winding up and all costs, charges, and expenses properly incurred in the winding up are payable out of the assets of the company.
6. Commencement of voluntary winding up:
The voluntary winding up of a company can take 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 authorizing it,
7. Conclusion:
To conclude I can say that, the winding up of a company means the end of the company. it is proceeding under the Companies Ordinance 1984, in which all affairs are wound up companies ordinance laid down. three different methods to wind up the business of the company. a company may 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.