What is winding up the company
Who may petition to the court and on what grounds for compulsory winding up.?
1. Introduction:
Winding up a company means the end of the life of a company is an artificial person. 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 are sold out and claims of the creditors must be out of sale proceeds. the balance of any is distributed among the shareholders proportionately to their shares.
2. Definition:
When a company ceases to exist and its property is administered 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.
I am winding up under the supervision of the court.
4. Compulsory winding up by the court:
A company may be wound up by an order of the court. This is also called the compulsory winding up of the company.
5. Grounds:
Following are the grounds for the compulsory winding up of the company.
I. By special resolution:
If a special resolution has been passed by the company to be wound up by the court.
II. Failure to submit the statutory report:
If a company fails to submit a statutory report to the registrar of the companies.
III. Failure to submit the statutory report:
If a company fails to hold a statutory meeting within a prescribed period.
IV. Failure to hold an annual general meeting:
If a company fails to hold two consecutive annual general meetings.
V. Delay in commencement of business:
If a public company does not commence business within one year of the date of its incorporation or suspends business for a whole year, the court may order for its winding up.
VI. Reduction in members:
A public company may be wound up if its members are reduced below seven and in the case of a private company below two.
VII. Unlawful or fraudulent activities:
If a company is carrying on a business which is unlawful or fraudulent activities the court may order for winding up.
VIII. Failure to pay debt:
A public company may be wound up by the order of the court. if it is proved that it is unable to pay debts.
IX. Failure to maintain accounts:
If a company fails to maintain its accounts the court may order for the winding up of the company.
X. Ceases to be a listed company:
The court may wind up a company if it ceases to be a listed company.
XI. Just and equitable:
The court can order the winding up of the company if it feels that it is just and equitable that the company should be wound up.
XII. Failure to pay debt:
- (i) If the amount equals one percent of its paid-up capital and the company has not paid within thirty days after getting the notice of payment.
- (ii) If the order of the payment has been passed against the company by the court or by the order of another competent authority the payment has not been made wholly or partly.
- (iii) The court has sufficient reason that the company has not paid debts.
6. Who may petition:
Under Companies Ordinance 1984 following may make an application for winding up of the company.
I. Petition by the company:
The company may present a petition for winding up of the company when it has passed a special resolution.
II. Contributor's petition:
Contributors who are the shareholders of the company may present a petition for the winding up of the company.
III. Creditor's petition :
A creditor may apply for the winding up of the company.
IV. Registrar petition:
The registrar of a company may also file a petition for the winding up of the company.
V. Commission's petition:
The commission is entitled to file a petition for the winding up, where it appears from the report of the person appointed to investigate the affairs of the company, that the business of the company has been conducted for fraudulent or unlawful purposes.
7. Conclusion:
To conclude, winding up 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 lays down three different methods to wind up the business of the company. the court is empowered to order the winding up of the company.