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Winding Up

Winding up of a company is defined as a process by which the life of a company is brought to an end and the properties of company are realized and liabilities are paid off for the benefit of its members and creditors.

Under the process, the life of the company comes to an end & properties of company are realized and liabilities are paid off for the benefit of its members and creditors. A liquidator is appointed for the purpose of realization and payment. After payments of all the liabilities of the company, if any surplus left, it is distributed among the stakeholders as per the Companies Act. Winding up does not necessarily mean that the company is insolvent. A perfectly solvent company may be wound up by the approval of members in a general meeting.


There are differences between winding up and dissolution. Winding up is the process to bring the companies to its end. At the end of winding up, the company will have no assets or liabilities. When the affairs of a company are completely wound up, the dissolution of the company takes place. On dissolution, the company's name is struck off the register of the companies and its legal personality as a corporation comes to an end.


Modes of winding up :


There are three ways, in which a company may be wound up. They are:


Ø  Winding up by the court.

Ø  Voluntary winding up.

i. Members Voluntary winding up.

ii. Creditiors Voluntary winding up.

Ø  Winding up subject to supervision of the court.


Company winding up by Court

Winding up by Court is also known as a compulsory winding up. It begins with the presentation of a petition in Court. The petitioners include creditors, liquidator, the Registrar of companies or the Official Receiver or any other beneficiary.


Voluntary winding is divided into 2 categories:

Ø  Members’ voluntary winding up is the liquidation of a solvent company where the directors have formed an opinion that the company will be able to pay its debts in full within the period of 12 months after the commencement of winding up as stated  under the provisions of Companies Act.

Ø  Creditors’ voluntary winding up is a liquidation of an insolvent company where the directors make a declaration stating that the company cannot, by reason of its debts and liabilities, continue its business.


Winding up subject to supervision of the court.

Winding up subject to supervision of court, is different from "Winding up by court."  Here the court only supervises the winding up procedure. Resolution for winding up is passed by members in the general meeting. It is only for some specific reasons, that court may supervise the winding up proceedings. The court may put up some special terms and conditions also.

However, liberty is granted to creditors, contributories or other to apply to court for some relief.

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