B Law Winding Up and Dissolution of a Company

8/3/2019 B Law Winding Up and Dissolution of a Company

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Winding up and

Dissolution of a CompanyWinding up means putting an end to the life of a

company. It is a legal process by which thecompany is dissolved.

Company being an artificial person, is created by

law and hence dissolved by law.


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The object of winding of a company is to

dispose the assets off the company, pay off

the debt out of the assets [or fromcontributions from its members and

distribute the surplus if among the

members in proportions to their holdingsin the company.]

Objective of winding up


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Winding up/Dissolution

Generally, winding up and dissolution are

taken as the same. But from legal point of

view, there is a difference between the two.

The company is not dissolved immediately at

the commencement of the winding up order.

But on dissolution the corporate status of the

company comes to an end. The maindifference between winding up and

dissolution are as follows:-


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Cont

Winding up precedes dissolution. Beforedissolution and after the order of winding up

the legal status of the company continues and

it can be sued in the court of law. But on the

dissolution the legal status of the company

comes to an end. Its name is struck off from

the Registers of the Company by Registrar of

the company and it cannot be sued in the

court of law.


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In winding up, the proceedings of the

winding up are conducted by the

liquidator. He realises the assets, pay

debts and finally distributes anysurplus among the members in

accordance with their right. In

dissolution no such proceedings are

conducted.


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In winding up the liquidator represents

the company whereas in dissolution no

such representation is made.

In case of winding up the creditors mayprove their debt. But in dissolution it cannot

be done as the company ceases to exist.


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The order of the court is not necessary in case

of winding up of the company as there can be

voluntary winding up of the company. Butdissolution essentially require order of the

court.


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Petition for winding up

The National Company Law Tribunal, i.e.; NCLT

does not itself wind up the company. Anapplication to the NCLT for the winding up of a

company is made by a petition. A petition maybe presented by any of the following:

1. By the company

2. By any creditor or creditors; or3. By any contributory or contributories: or

4. By all or any of the prior whether together orseparately; or by Registrar; or


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5. By Central Government in that behalf; or

6. By the Central Government or a state

Government


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Consequences of Winding up

order

Intimation to the official Liquidator and

Registrar

Copy of Winding up order to be Filed with the

Registrar Effect on officers and employees of the

company

Suits stayed

Submission of Audited books and Accounts to

NCLT


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Effect of Winding up order

Official Liquidator to be liquidator


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official liquidator or

procedure of winding up by

nclt

Appointment of official Liquidator

a. May be appointed from a panel ofprofessional firms of chartered accounts,

advocates, company secretaries, cost and

work accountants or firm having a

combination of these professional, which the

Central Govt. shall constitute for the NCLT; or


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b. May be a body corporate consisting of such

professionals as may be approved by the

Central Government.c. May be a whole-time or part-time officer

appointed by Central Government from time

to time.


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LIQUIDATOR:

On winding up order being made in respect of

a company, the official liquidator shall, byvirtue of his office, become the liquidator of

the company.

The liquidator should be described by thestyle of the Official Liquidator of the

particular company in respect of which he

acts, and not by his individual name.

Documents

B Law Winding Up and Dissolution of a Company