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lecture-35 - MODES OF WINDING UP ACT 1956 THE COMPANIES A...

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Learning Objectives After reading the lesson, you will be able to know about the: · The meaning of winding up of a company · The modes of winding up of a company · The petition for winding up of a company · The commencement of winding up of a company · ·The powers of a tribunal/ liquidator in the winding up of a company Introduction A company comes into existence by a legal process and when for any reason, it is desired to end its existence; it must go through the legal process of winding up of its affairs. Winding up or liquidation is the process by which the management of a company’s affairs is taken out of its director’s hands, its assets are realized by a liquidator, and its debts are paid out of the proceeds of realization. If any balance remains in the hands of the liquidator, it is divided among the members of the company in accordance with their rights under the articles. However, you must understand that winding up and dissolu- tion of the company are not one and the same thing. A company is said to be dissolved when it ceases to exist as a corporate body. Winding up precedes dissolution. It is the process by which the dissolution of the company is brought about. Let us learn about the modes of winding up. Modes of Winding Up (1) The winding up of a company may be either- (a) By the Court; or b)Voluntary; or c)Subject to the supervision of the Court. (2) The provisions of this Act with respect to winding up apply, unless the contrary appears, to the winding up of a company in any of those modes. Winding up By The Court Section 433 lays down that the Court in the following case may wind up a company: 1.If the company has passed a special resolution of it’s being wound up by the Court. It may be mentioned here that without such act cannot be done by the directors themselves. It can be done only if a resolution to this effect has passed at a general meeting of the company. The members can however ratify the act of directors already done. 2.If the company makes default in delivering the statutory report to the Registrar or in holding the Statutory Meeting. A petition under this ground can be made either by the Registrar with the previous approval of the Central Government or by a contributory or after 14 days after the last day on which the statutory meeting should have been held. 3.It does not commence business within one year from its incorporation or it suspends business for a whole year. 4.The number of its members falls before the minimum required i.e. 2 in case of a private company and 7 in case of a public company. 5.It is unable to pay its debts. 6.If the Court of opinion that it is just and equitable that the company should be wound up. Let us now understand when the Company would be deemed to be unable to pay its debts and what do we mean by just and equitable cause?.
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