MODULE 5

Company meetings and winding up: Requisites of a valid meeting-statutory meeting-

Annual General Body Meeting-Extra ordinary meeting-Board Meetings-Resolutions-
types-Company Secretary-Qualification-appointment-duties-Winding up-meaning-
modes of winding up-winding up by Tribunal-Member’s voluntary winding up-
Creditor’s voluntary winding up-Liquidator-powers-Duties and liabilities-
Consequences of winding up.

Company meetings
When two or more persons get together at one place to discuss any common issue, it is called
a meeting. Every gathering does not constitute a meeting. Company meeting means coming
together of at least a quorum of members in order to transact either ordinary or special
business of the company.
Characteristics of company meeting
 Two or more persons must present.
 Notice is essential.
 Held at a particular place, date and time.
 Must be held as per companies Act
REQUISITES OF A VALID MEETING (ESSENTIALS OF A VALID MEETING)
A meeting must be called and convened as per the provisions of the Act and
the Articles of Association. If there are any irregularities in the procedure followed for
convening and conducting a meeting, the proceedings of that meeting become invalid
and the decisions taken in the meeting will not be binding. A meeting should be
properly convened and legally constituted. Following are the important requisites of a
valid meeting:
(1) Proper authority to convene a meeting

The board of directors is the proper authority to convene a general meeting of a company
and for this purpose the board should pass a resolution at a duly convened meeting of
the board. If the directors fail to call the meeting on request, the Tribunal is the proper
authority to call the meeting.

(2) Notice of the meeting

A notice with the required length of time must be given to every member entitled to
receive it. The notice shall state the kind of meeting, date, time and the place of meeting
and the business to be transacted at the beginning. For example, in the case of general
meeting a 21 days' notice should be given to the members.
(3) Quorum
The quorum is the minimum number of persons that should be present at the meeting
either in person or by proxy. Usually, the quorum is fixed by the Articles. If the quorum
is not present with half an hour from the appointed time for the meeting, the meeting
shall be dissolved or adjourned.
 (4) Business to be transacted in the meeting

Notice of the meeting should state the business to be transacted. The business may
be a general business or special business.
(5) Chairman of meeting: - Before a meeting of a company can start its business, it is
required to have a chairman. It is the chairman who is to preside at the meeting of the
company. He is to conduct the meeting and to maintain the order.
Duties of the chairman: -
(a) He must take care that the minority is not oppressed in any way.
(b) He must give the members who are present a reasonable opportunity to
discuss any proposed resolution
(c) He must see that the meeting is properly convened and constituted
(d) The chairman must conduct the proceedings in accordance with the provisions
of the act, the company’s articles of association
(e) He should adjourn the meeting when it is impossible.
(f) He must take care that the opinion of the meeting is properly ascertained with
regard to the questions before it
(g) He must keep order in the meeting.
(h) He should exercise his casting vote, if any,
(i) The minutes of the meeting should be properly recorded and signed by the
chairman.
(6) Minutes of the meeting
The term 'minutes' means the official record of the meetings of a company. These are the
summary of the business transacted; decisions and the resolutions arrived at the meeting.
Every company must keep a record of all proceedings of the meetings. Minutes should
be signed by the Chairman of the meeting.
(7) Voting: -A vote is the formal expression of the will of the members of the house either
for or against a proposal. The matters proposed and duly recommended in a general
meeting of the company are decided by the voting of the members of the company. The
procedure of voting is regulated by the articles subject to the provisions of the act.
1. Voting by a show of hands at any general meeting, unless the articles otherwise
provide, a resolution put to the vote is in the first instance decided by a show of
hands except when a poll is
2. Voting by poll [sec. 179] if there is dissatisfaction among the members about the result
of voting by the show of hands, they can demand a poll. 'Poll' means counting the
number of votes cast for and against a motion
(8) Proxies: - A meeting has right to vote either in person or by proxy. Any member of a
company who is entitled to attend and vote at a meeting of the company can appoint
another person (whether a member or not) as his proxy to attend and vote instead of
himself but a proxy so appointed will have no right to speak at the meeting.
(9) Resolutions (SECTION 114)
A resolution is the formal decision of a meeting on any proposal before it. Decisions
of a company are made by resolutions of its members passed at meetings of members.
Motions which are duly proposed, seconded and passed become resolutions.
Statutory Meeting
There is no provision for statutory meeting as per Companies Act, 2013. But
as per the Act of 1956 every company limited by shares every company limited by
shares and every company limited by guarantee and having share capital must hold a
general meeting of its shareholders within a period not more than six months but not less
than one month from the date at which the company is entitled to commence its
business. Such a first meeting of shareholders is called the statutory meeting. It is held
only once in the life time of a company. Private companies are not required to hold such
a meeting. Similarly, companies limited by guarantee and not having share capital need
not hold a statutory meeting.
Statutory report: The directors are required to prepare and send a report, called the
statutory report to every member of the company at least 21 days before the date of the
meeting. This report is required to be submitted with the Registrar of Companies.)
Contents of statutory report: The statutory report contains the following information:
1. The total numbers of shares allotted distinguishing as fully paid up, partly paid up and
shares issued for consideration other than cash.
2. The total amount of cash received by the company for the shares allotted.
3. An abstract of the receipts of the company and of the payments made upto a date within
seven days of the day of the report.
4. The details of the directors, auditors) and other managerial personnel.
5. The details regarding the contracts entered by the company.

Kinds of company meetings

 Meeting of Directors
 Meeting of shareholders
 Meeting of Creditors
 Meeting of debenture holders
I Meeting of directors
The directors must hold their meetings as frequently as possible. These meetings of the
directors are known as board meetings.
Important matters relating to directors meeting
1. Frequency of board meeting
First meeting should be held within thirty days from the date of incorporation. Minimum four
meeting of BOD should be held every year. One person company, small and dormant
company at least one meeting of the BOD has been half of the calendar year.
2. Notice of the meeting
A minimum seven days’ notice should be sent to every director at his address by post or mail.
3. Agenda
The term agenda means things to be done. It is a statement of the business to be transacted at
a meeting.
4. Quorum
The quorum for a meeting of BODs of a company shall be 1/3rd of its total strength or two
directors whichever is higher.
5. Chairperson
Every meeting of the board must have chairperson to preside over it.
6. Resolution
Decisions are taken by directors by passing resolutions.
7. Voting
Each director has one board for each resolution put to vote at the meeting. In case of an
equality of votes, the chairperson shall have a second or casting vote.
II. Meeting of shareholders
Shareholders meeting can be any of the following:
1. Annual general meeting
2. Extra ordinary meeting
3. Class meeting
1. Annual general meeting
Annual general meeting is regarded as the most important of all company meetings. The
purpose of the meeting is to give full information to members of the progress by the
company during the year. The first annual general meeting of the company shall be held
within a period of nine months from the date of closing of the first financial year of the
company and in any other case within a period of six months from the date of closing of the
financial year. If a company holds its first annual general meeting as aforesaid, it shall not
be necessary for the company to hold any annual general meeting in the year of its
incorporation.
Default in Holding Annual General Meeting
According to section 97, if any default is made in holding the annual general
meeting of a company under section 96, the Tribunal may call or direct the calling of an
annual general meeting, on the application of any member of the company. In that case
the Tribunal shall give necessary ancillary or consequential directions as it thinks fit, such
direction may include a direction that one member of the company presents in person or
by proxy shall be deemed to constitute a meeting.
If any default is made in holding a meeting of the company in accordance with
sections 96 and 97, the company and every officer of the company who is in default shall
be punishable with fine which may extend to one lakh rupees and in the case of a
continuing default, with a further fine which may extend to five thousand rupees for
 everyday during which such default continues.

Secretary’s duties in connection with annual general meeting

 Before the meeting
 Ensure the final accounts are ready.
 Final accounts will be submitted to the board meeting for approval.
 Secretary must issue notice to the shareholders, directors, auditors and stock exchange at
least twenty-one days before the date of the meeting.
 Make necessary arrangement for poll, preparation of voting papers etc.
 At the meeting
 To get the attendance register signed by the shareholders.
 To help the chairman in ascertaining the quorum.
 To read the auditor’s report.
 To help the chairman in the conduct of meeting.
 To take notes for preparing meeting.
 After the meeting
 To prepare minutes.
 To get minutes of meeting approved by the chairman.
 To send intimation of the appointment to the directors and auditors.
2. Extra ordinary meeting
All general meetings of a company other than annual general meeting are called
extra ordinary general meeting which is held between two annual general meetings.
Any general meeting other than annual general meeting is called extra ordinary
general meeting. It is convened to transact any urgent or extra-ordinary business.
Such meetings are held to transact business which falls outside the usual business
which cannot be postponed till the next annual general meeting.

Extraordinary meeting may be called in the following ways:

1. By directors: Regulation 43 of Table F provides that the directors may, whenever they
deem fit, convene an extra ordinary general meeting. The board has to pass a resolution to
that effect.
2. By directors on request of shareholders: The members also may compel the directors to
call an extra- ordinary meeting. The requisition for calling such meeting must be signed by at
least one-tenth of the holders of paid-up capital, having right to vote. If the company has no
share capital, the requisition must be signed by members having at least 1/10 of the total
voting power of all members, having a right to vote. The requisition made shall set out the
matters for the consideration of which the meeting is to be called and shall be signed by the
requisitionists and sent to the registered office of the company.

3. By requisition of shareholders: If the Board does not within twenty one days from the date
of receipt of a valid requisition proceed to call a meeting on a day not later than forty five
days from the date of receipt of such requisition, the requisitionists may themselves proceed
to call the meeting and claim necessary expenses from the company. But the meeting must be
called before the expiry of three months from the date of deposit of requisition (Section
100(4)).
4. By the Tribunal If due to any reason it is impracticable to hold extra ordinary general
meeting.
3. Class meeting
Meeting of different classes of shareholders is known as class meeting. Where
the share capital of the company consists of different classes of shares, meetings of
different classes of shareholders may have to be called in order to discuss matters
affecting them. For example, meetings of preference shareholders. Such a meeting can
be attended only by that class of shareholders, Class meetings are to be held if the rights
attaching to a particular class of shares are to be changed. Similarly, under Section 394,
where a scheme of arrangement is proposed, meetings of different classes of
shareholders are held. The Companies Act says that the provisions of the Act as
applicable to general meetings also apply to class meetings.

III. Meeting of Creditors

A company call the meeting of creditors, when the company proposes to make a scheme for
arrangement with its creditors.
IV. Meeting of debenture holders
The company may call the meeting of its debenture holders to get their approval for making
any change in their terms and conditions.
Meetings of Committees of the Board

In large companies as a part of division of management work sub-committees of directors

are constituted. By doing so, the full board will probably not need to meet more
frequently. Regulation 71 of table F provides that the Board may, subject to provision of
the Act, delegate any of its powers to a committee consisting of such member or members
of its body as it thinks fit.

Audit Committee (Section 177)

The requirements relating to audit committee was first introduced by the Companies
(Amendment) Act 2010. These Committees are constituted for ensuring self discipline
and for an effective and efficient management system in public companies by enabling
 the Board of Directors to discharge their functions effectively.

Constitution of an Audit Committee (Section 177(1))

Every listed company and every public company

(i) Having paid up capital of ten crore rupees or more;

(ii) Having turnover of one hundred crore rupees or more;

(iii) Having in aggregate outstanding loans or borrowings or debentures or deposits

exceeding fifty crore rupees or more shall constitute an Audit Committee.

Structure of the Committee (Section 177(2))

The Audit Committee shall consist of a minimum of three directors with independent
directors forming a majority. Majority of members of Audit Committee including its
chairperson shall be persons with ability to read and understand, the financial statement.

Meeting of Audit Committee

Unless otherwise required there shall be minimum of at least one audit committee meeting
in a year. In case of listed companies, the Audit Committee will meet once in a quarter to
approve the quarterly financial result.

Establishment of Vigil Mechanism

Vigil/whistle blowing means calling the attention of the top management to some wrong
doing occurring within an organisation. The Companies Act 2013 has mandated certain
companies to establish vigil mechanism to report on any unethical events occuring in an
organisation.

Nomination and Remuneration Committee (Section 178(1))

The constitution of the Nomination and Remuneration Committee is as that of an Audit

Committee. The committee consists of three or more non-executive directors out of which
not less than one half shall be independent directors. The chairperson of the company can
be appointed as a member of the Nomination and Remuneration Committee but he shall
not chair such a committee. It is the duty of the committee to identify the persons to
become directors and also in the senior management of the company according to the
criteria laid down. The Committee should also recommend to the Board their appointment
and removal and shall carry out evaluation of every director’s performance. The committee
can also recommend the board a policy relating to the remuneration for the directors, key
managerial personnel and other employees. The chairperson of the committee has a right to
attend the general meeting of the company.
Stakeholders Relationship Committee (Section 178(15))

According to this section every company which has more than one thousand shareholders,
debenture holders, deposit holders and any other security holders shall constitute a
stakeholders relationship committee with a non executive director as a chairperson, and
other members decided by the Board, with the objective of grievance redressal of various
stakeholders. The chairperson of the Committee has a right to attend the general meetings
of the company.

Corporate Social Responsibility Committee (Section 135)

Corporate Governance Committee and Risk committee are some other committee's
prevalent in the corporate sector.
Resolutions (SECTION 114)
A resolution is the formal decision of a meeting on any proposal before it. Decisions
of a company are made by resolutions of its members passed at meetings of members.
Motions which are duly proposed, seconded and passed become resolutions.
Types of resolution
a. Ordinary resolution
It is one which require a single majority that is the votes in favour should exceed the votes
against the resolution.
b. Special resolution
It is a resolution which is passed by at least three fourth majority of votes of members on
show of hands or electronically.
c. Resolution Requiring Special Notice (Section 115)

Difference between ordinary resolution and special resolutions

Ordinary resolution Special resolution

1. Required to transact ordinary business of Required to transact business of an important and

routine nature serious nature

2. Notice need not specify the nature of Notice must specify that it is a special resolution
resolution

3. Only a simple majority is required (more A three-fourths majority is required

than 50%)

4. No need of filing a copy of the resolution 4.A copy of the resolution shall be filed with the
 Registrar within 15 days

5. The Chairman can use his casting vote [Link] Chairman cannot use his casting vote

c. Resolution Requiring Special Notice (Section 115)

Where, by any provision contained in the Act or in the articles of the company, special notice is
required of any resolution, notice of the intention to move such resolution shall be given to the
company by such number of members holding not less than 1% of total voting power or holding
shares on which such aggregate sum not exceeding five lakh rupees has been paid up and the
company shall give its members notice of the resolution in the manner prescribed

Motions and Resolutions

The term 'motion' can be defined as a definite proposal or proposition put before a meeting
for consideration and decision. No decision on one important matter can be taken without a
motion being put before the meeting. The person who puts the motion called the proposer.
Ordinarily the motion is required to be seconded. A motion when passed is called a
resolution.

Procedure of Moving a Motion

If a member has given previous notice regarding the motion, the Chairman
asks him to formally move the motion at the meeting. In the absence of any previous
notice, he can move the motion after obtaining permission of the Chairman. Any
member can second the motion. When a motion is duly moved and seconded, the
chairman invites a debate on it. When the debate or discussion is going on, the motion
may be interrupted by members in various ways. They are in the form of amendments,
formal motions and points of order.
(a) Amendments: An amendment is an alteration or modification proposed by a
member in the wordings or terms of the original motion before it is voted upon
and adopted.
(b) Formal motions: Formal motions are those motions which are concerned with the
procedure of business at a meeting. They are usually moved for the purpose of
interrupting or delaying or speeding up the discussion on a motion. The principal types
of formal motions are (1) previous question (2) closure (3) next business and (4)
adjournment of debate.
‘Previous question’ means moving a motion by a member present in the meeting
worded "I move that question be not now put" with an intention to stop the discussion on
the original motion. In "closure", if a member feels that sufficient discussion has taken
place on a motion, he may move
"That the question be now put” with an intention that the motion is put to vote at once.
In "next business", if a member is interested in delaying or avoiding a decision on a
 particular motion, he may move “that the meeting do proceed to the next business". If
the motion is carried, the main motion is dropped from discussion. In adjournment
motion, a member present may move that the debate on the motion may be postponed or
adjourned to some other time.
(c) Point of order: When the discussion on a particular motion is in progress, any member
may raise a point of order to draw the attention of the Chairman to some irregularity in
the procedure of the meeting. When a point of order is raised, the chairman may allow a
short debate on the point of order or may give him ruling which is binding on the
member.

COMPANY SECRETARY
Company secretary is a principal officer responsible for the secretarial and
management of the company as per companies Act.
According to Companies Act, a secretary must be an individual. A firm or a company
cannot be appointed as Company Secretary. The Secretary guides the management in the
day-to-day work of company law and mercantile law and of accounts, taxation, holding
of meetings, drafting of reports, resolutions, etc. His duties are of ministerial and
administrative nature and is not concerned with direction, control or management of the
affairs of the company. He is an officer of the company and his duties consists of duties
to the Board, duties to the shareholders and duties to the company.
Qualification of Secretary
According to "Companies (Appointment and Qualifications of Secretary) Rules
1988, and subsequent amendments, in case of companies having a paid up share capital
of two crore rupees or more, a whole-time secretary must be a member of the Institute
of the Company Secretaries of India. In case of companies having a paid-up share
capital of less than two crore rupees, the secretary must possess any one of the
following qualifications:
(a) A degree in law granted by any University
(b) Membership of the Institute of Chartered Accountants of India or Institute of
Cost and Works Accountants of India.
(c) A post graduate degree or diploma in Management granted by any
University or the Indian Institute of Management.
(d) A post-graduate degree in Commerce granted by any University.
(e)A diploma in company law granted by any Indian Law Institute,
Other Qualifications
In order to be a Company Secretary, statutory qualifications are not
enough A company secretary should possess the following special qualifications:
(1) Knowledge of Company law
(2) Knowledge of Mercantile law
 (3) Knowledge of Economics
(4)Knowledge of Accounting
(5) General knowledge
Appointment of Company Secretary
According to Section 203 of the Companies Act, 2013, every company
belonging to such class or classes of companies as may be prescribed shall have the
following whole-time key managerial personnel:
(1) Managing director, or Chief Executive Officer or manager and in their absence,
a whole- time director;
(2) Company secretary
(3) Chief Financial Officer
The above section provides that a secretary shall be appointed by means of a resolution
of the Board containing the terms and conditions of the appointment including the
remunerations. A whole-time secretary shall not hold office in more than one company
except in its subsidiary at the same time. If the office of the whole-time secretary is
vacated the resulting vacancy shall be filled-up by the Board at a meeting of the Board
within a period of six months from the date of such vacancy.
Duties of company secretary
1. Promotion, formation and incorporation of companies.
2. Arranging board meeting.
3. Arranging general meeting.
4. Preparation of minutes.
5. Maintaining the statutory register.
6. Keeping safe custody of company seal.
7. Communicating with the company shareholders.
8. Ensuring good corporate governance.
Rights of company secretary
1. He has the right to supervise, direct and control all the office
activities of the subordinate office.
2. He has the right to attend board meeting.
3. He has the right to claim his salary and other allowances.
4. He has the right to issue proper guidelines to concerned officers.
5. During winding up he can claim his legal dues.
Legal Position of a Company Secretary
(1) Servant of the Company: - A Secretary is expected to act in accordance with the
instructions given by the Board Hence he is a servant of the company
(2) Officer of the Company. He is the chief officer of the company and key managerial
personnel. He has to guide and supervise all administrative and ministerial duties of a
company. Hence, he is an officer of the company.
(3) Agent of the Company: - The Secretary can enter into contracts as the chief
administrative officer of the company, on behalf of the company. Hence, he is an
agent of the company.

WINDING UP OF A COMPANY
Meaning:
Winding up is the process of putting an end to the life of a company. As a company is created
by law it can come to an end only by a legal process . It is a process of realisation of assets,
payment of liabilities and distribution of surplus among the members of the company. It is
also known as liquidation of company.
Reasons for Winding Up
The need for winding up arises because of the following reasons:
(1) The main objects of the company for which it was established have been accomplished.
(2) The company is not in a position to pay off its debts in full.
(3) It has become impossible to carry out the main objects of the company.
(4) The company is under a scheme of amalgamation or reconstruction.

Modes of winding up
a. Winding up by tribunal
b. Voluntary winding up
a. Winding up by tribunal (Compulsory winding up)

Circumstances in which company may be wound up by National Company Law

Tribunal
A company may be wound up by NCLT under the following circumstances:
(a) On inability to pay debts of the company [Section 433(e)]:-If the company is
unable to pay its debts, the Tribunal may order winding up of the company. A company
shall be deemed to be unable to pay its debts in the following situations:
(a) If a creditor to whom a company owes 1,00,000 or more have served a notice on the
company and the company has neglected it for three weeks If execution or other process
issued on a decree or order of any civil Court in favour of a creditor is returned
unsatisfied wholly or partly. (c) If it is proved to the satisfaction of the Tribunal that the
company is unable to pay its debts after considering the contingent and prospective
 liabilities of the company.
(b) By passing a special resolution: - If the company by a special resolution resolved that it
may be wound up by the Tribunal, the Tribunal may pass an order to that effect under
section 271(1)(b)
(c)Acts of the company against sovereignty and integrity of India: -If the company has
acted against the interests of sovereignty and integrity of India, the security of the State,
friendly relations with foreign states, public order, decency or morality.
(d)On an order of Tribunal under section 258: -On the basis of the report of the
interim administrator under section 256, if the Tribunal is satisfied that the creditors
representing three- fourths in value of the amount outstanding against the sick company
has resolved that it is not possible to revive and rehabilitate such company, the Tribunal
shall order for winding up of such company.
(e)On an application made by the Registrar:-If on an application made by the Registrar
or any other person authorised by the Central Government, the Tribunal is of the opinion
that the affairs of the company have been conducted in a fraudulent manner or the company
was formed for fraudulent and unlawful purpose or the persons concerned in the formation
or management of its affairs have been guilty of fraud, misfeasance or misconduct in
connection there with and that it is proper that the company be wound up.
(f)Default in filing the annual return or financial statements: -If the company has
made a default in filing with the Registrar its annual returns or financial statements for
immediately preceding five consecutive financial years.
(g)If it is just and equitable [Section 271(g)): -When the Tribunal is of the opinion that
it is just and equitable that the company should be wound up, the Tribunal can order the
winding up of the company.
Petition for Winding up (Section 272)
Under Section 272, the petition for the winding up may be presented by any one of
the following parties:
(1) Petition by the company: -A company may present to the Tribunal a petition for
winding up on passing a special resolution for the purpose provided it is accompanied by
a statement of affairs in the prescribed manner.
(2) Petition by contributories: -A contributory means a person liable to contribute
company when the company is wound up to the assets of the
(3) Petition by creditors: -One or more creditors including any contingent or
prospective creditors may file a petition on the ground that the company is unable to
pay its debts.
(4) Petition by registrar: -The Registrar of companies can present a petition for
winding up after getting previous sanction of the central government on the
following grounds:
(a) If the company has acted against the sovereignty and integrity of India.
(b) If the company is unable to pay its debts.
 (c) If the Tribunal is of the opinion that it is just and equitable that the company be wound
up.
(d) If there is a default in filing with the Registrar its financial statements for any
five consecutive financial years.
(5) Joint petition: -A company, contributories and creditors may jointly present
a petition for winding up
(6)Petition by any person authorised by the central government: -The Central
Government may appoint an inspector to investigate into the affairs of the company
and on the basis of his report; the Central Government may authorize any person
including the Registrar to apply to the Tribunal for winding up of the company.
(7) By the central or a state government

b. Voluntary winding up (Members voluntary winding up)

It means winding up of the company by the members without interference by the tribunal.
Conditions for voluntary winding up /Steps in Voluntary Winding up
I. Declaration of Solvency (Section 305):-Where it is proposed to wind up a company
voluntarily, its director or directors or in case the company has more than two directors,
the majority of its directors shall, at a meeting of the Board, make a declaration verified
by an affidavit to the effect that they have made a full enquiry into the affairs of the
company and they have formed an opinion that the company has no debt or whether it
will be able to pay its debts in full from the proceeds of assets sold in voluntary winding
up. The declaration shall be made within five weeks immediately preceding the date of
passing of the resolution for winding up and it is delivered to the Registrar for
registration before that date. It shall contain a declaration that the company is not being
wound up to defraud any person or persons. It shall be accompanied by a copy of the
report of the auditors of the company on the profit and loss account of the company for
the period commencing from the date up to which the last such account was prepared
and ending with the latest practicable date immediately before the making of the
declaration and the balance sheet of the company as on that date which would also
contain a statement of the assets and liabilities of the company on that date. Where there
are any assets of the company it should be accompanied by a report of the valuation of
the assets of the company prepared by a registered valuer.
Where the declaration of the directors proved to be wrong, such directors shall be
punishable with imprisonment or with fine or both.
II. Meeting of Creditors (Section 306): -The Company shall call a meeting of the
creditors either on the day of general meeting or on the next day for which a notice shall
be sent by registered post to the creditors. The Board of directors shall present a full
statement of the position of the affairs of the company together with a list of creditors of
the company. The Board shall appoint one of the directors to preside at the meeting.
Where two-thirds in value of creditors are of the opinion that the company be wound up
in the interests of all parties, the company shall be wound up voluntarily. The company
may not be able to pay for its debts in full from the proceeds of assets sold in voluntary
winding up and pass a resolution that it shall be in the interests of all parties if the
 company is wound up by the Tribunal, the company shall within fourteen days thereafter
file an application before the Tribunal. The resolution so passed at the creditors meeting
is required to be filed with the Registrar within ten days of the passing of the resolution.
III. Publication of Resolution (Section 307):-When a resolution for voluntary winding
up is passed, within fourteen days of the passing of the resolution, a notice of the
resolution should be given by advertisement in the Official Gazette and also in a
newspaper which is in circulation in the district where the registered office or the
principal office of the company is situated. Company and every officer who is in default
shall be punishable with fine up to five thousand rupees for everyday during which such
default continues.
IV. Commencement of Voluntary Winding up: -As per section 308, a voluntary winding
up shall be deemed to commence on the date of passing of the resolution for voluntary
winding up.
V. Appointment of Company Liquidator (Section 310): -The Company shall appoint a
company liquidator in the general meeting from the panel prepared by the Central
Government for the purpose of winding up affairs. In case the creditors do not approve
the appointment, creditors shall appoint another company liquidator. The liquidator shall
file a declaration within seven days of the date of his appointment disclosing conflict of
interest or lack of independence in respect of his appointment, if any, with the company
and creditors and such obligation shall continue throughout the term of appointment.
VI. Notice of Appointment to Registrar: -As per section 312, the company shall give
notice of the appointment of a company liquidator to the Registrar along with his name
and particulars within ten days of such appointment. In case of contravention, company
and every officer of the company who is in default shall be punishable with fine up to
five thousand rupees for everyday during which such default continues.
VII. Appointment of Committees (Section 315):-The company in its general meeting or
by the creditors can appoint such committees as considered appropriate to supervise the
voluntary liquidation and assist the company liquidator in discharging his or its
functions.
VIII. Submit Report on Progress of Winding up:-As per section 316, the company
liquidator shall submit quarterly report on progress of winding up to its members and
creditors and shall also call at least one meeting each of members and creditors in every
quarter and appraise them of the progress of the winding up. If the liquidator fails to
comply with this requirement, he shall be punishable with fine up to ten lakh rupees for
each such failure.
IX. Report of Company Liquidator to Tribunal for Examination of Persons: -Section
317 empowers the Tribunal to consider the report of the company liquidator and order
for investigation if the report specifies that a fraud has been committed by any person in
respect of the company. It also empowers the Tribunal for examination and attendance
of any person indulging in the promotion or formation or conduct of the business of the
company.
X. Final Meeting and Dissolution (Section 318): -As soon as the affairs of the company
are fully wound up, the company liquidator shall prepare a report of winding up showing
 that the property and assets of the company have been disposed of and is fully
discharged or discharged to the satisfaction of the creditors and thereafter call a general
meeting of the company for the purpose of laying the final winding up accounts before it
and giving any explanation. If the majority of the members of the company are satisfied
that the company shall be wound up after considering the report, they may pass a
resolution for its dissolution. Within two weeks after the meeting, the company
liquidator shall:
 Send to the Registrar a copy of the final winding up accounts and copies of the
resolutions passed in the meetings
 File an application along with the report along with the books and papers of the
company relating to the winding up before the Tribunal for passing an order of
dissolution of the company.
 If the Tribunal is satisfied that the process of winding up has been just and fair, the
Tribunal shall pass an order dissolving the company within sixty days of the receipt
of the application. The company liquidator shall file a copy of the order with the
Registrar within thirty days. The Registrar, on receipt of the copy of the order passed
by the Tribunal, shall publish a notice in the Official Gazette that the company is
dissolved. If the company liquidator fails to comply with the above, he is punishable
with fine which may extend to one lakh rupees.
Provisions applicable to voluntary winding up
 Commencement of voluntary winding up
 Stopping the business.
 Appointment of company liquidator.
 Powers to remove and fill vacancy of company liquidator.
 Notice of appointment of liquidator.
 Cessor of board’s power.
 Powers and duties of company’s liquidator in voluntary winding up.
 Appointment of companies.
 Liquidator to submit report on progress of winding up.
 Report of liquidator to tribunal for examination of persons.
 Final meeting and dissolution of company.

Creditors' voluntary winding up

A creditors' voluntary winding up (also known as 'creditors' voluntary liquidation') is when

shareholders, under the scrutiny of the company creditors, forcibly seize the company. This
occurs when there is an insolvent company. In a creditors' winding up, an ordinary
resolution of the company to wind up and appoint a liquidator (Form G2), a notice of
appointment of liquidator (Form E2) and a creditors resolution, or a notice that no
resolution was passed at the creditors' meeting, must be filed with the CRO (Company
Registers Online)
 Difference between Winding up by Tribunal and Voluntary Winding up
Winding up by Tribunal Voluntary Winding up
1. Winding up by the Tribunal Winding up by passing resolution by the
company
2. Tribunal appoints the official liquidator The members or creditors appoint liquidator in
their meeting
3. Winding up process controlled by the Winding up process controlled by the
4. Tribunal
members or creditors

5. Declaration of solvency required Declaration of solvency not required

6. Winding up Committee not needed Winding up Committee is needed

Liquidator
A liquidator is an officer who is specially appointed to wind up the affairs of a company.
Powers and duties of company liquidator
 To verify the claims of all the creditors and consolidate them.
 To take into his custody all the assets, properties etc.
 To evaluate the assets and properties of the corporate debtor.
 To invite and settle claim of creditors, employees or any other claimant.
 To sell the whole of the undertaking of the company as a going concern.
 To raise any money required for the security of the asset of the company.
Liabilities of Liquidator
Concerning the liabilities of liquidators, Art. 546/2 refers to Art. 553, which stipulates the
liabilities of directors in joint-stock companies.
Pursuant to the said Article, in case the founders, members of the board of directors,
managers and liquidators violate their obligations as provided in law and in the Articles of
Association by fault, they are liable for the damages incurred to the company, the
shareholders and creditors of the company.
The liquidators, who pay money unjustly by violating the provisions relevant to the invitation
and protection of creditors, shall be liable as per Art. 553 TCC (TCC Art. 541/4).
The liability stipulated in said Article is based on the fault of the liquidators and it shall be
determined if the liquidators have performed their duties in diligence. The claimant shall
prove if the liquidators are in fault.
Although said liability in the relevant Article is a joint liability in principle, the joint liability
occurs only when the liquidators manage and represent jointly. Where the distribution of
duties is realized by a general assembly resolution and liquidators are separately authorized to
execute actions with regard to the liquidation, each is only liable for the results of the action
they executed.
The company, shareholders or creditors of the company can file a liability suit against the
liquidators in case they violate their obligations as provided in law or the company articles of
association. The lawsuit shall be initiated within two years from the date of becoming aware
of the damage and responsibility, and in any case, within five years from the date of the act
causing the damage. These time limitations constitute a prescription for the right of action.
However, if the action causing the damage constitutes a crime pursuant to Turkish Criminal
Law No. 5237 where there is a longer time limit on the right to take action, then the liability
lawsuit may be opened within such term.
Consequences of winding up
The following are the consequences of voluntary winding up:
(1) The company ceases to carry on the business: -On voluntary winding up, the
company loses the right to carry on its business except so far as may be required for the
beneficial winding up of the business. However, the corporate status and corporate
powers of the company will continue till it is dissolved.
(2) Powers of Board of Directors to cease: -On the appointment of a liquidator
on voluntary winding up of the company, all the powers of the board of directors,
managing or whole-time directors and the manager shall cease, except for the
purpose of giving notice to the Registrar of companies for the appointment of the
liquidator.
(3) No transfer of shares and no alteration of the status of the members of
the company: -On voluntary winding up any transfer of shares and any alteration
of the status of the members of the company shall be void. However, any transfer
made to or with the sanction of the liquidator is allowed.
(4) Discharge of employees: -On voluntary winding up the employees of the
company will be discharged except:
(a) When the liquidation is only for the 'reconstruction' of the company: or
(b) When the business is continued by the liquidator for the beneficial winding up of the
company.
(5) Documents of the company: -Every document in the nature of an invoice,
order for goods or business letter issued in the name of the company after the
commencement of winding up, must contain statement that the company is being
wound up.
(6) Secured creditors: -Secured creditors get first preference while applying assets
available to the liquidator for payment.
(7) Unsecured creditors
All debts due to unsecured creditors are to be treated equally and paid
proportionately. The unsecured creditors are considered for payment after
considering secured creditors, cost of liquidation, preferential payments and
debenture holders secured by floating charge.
DISSOLUTION OF A COMPANY
Dissolution means the stage when the company ceases to exist. On dissolution the existence
of a company comes to an end. It is similar to the death of a living person After the
dissolution of a company.
 a) The existence of a company ends.
b) The existence of the liquidator of the company also ends.
c) There is no more recognition of any loan of the company because the company is no more
in existence.
d) No work can be carried in the name of company.

Methods of Dissolution of a Company

Under the provisions of Indian Companies Act, 2013, a company may be dissolved in any of
the methods.
a) If the name of the company is removed from the register of companies by the
Registrar (Defunct company): According to Section 248 the register of company’s Act.
2013 (Registrar of companies may remove the name of any company from its register of the
companies, if
(i) a company has failed to commence its business within one year of its incorporation
(ii) the subscribers to the memorandum have not paid the subscription which they had
undertaken to pay within a period of one hundred and eighty days from the date of
incorporation of a company and a declaration to this effect has not been filed within one
hundred and eighty days of its incorporation; or
(ii) a company is not carrying on any business or operation for a period of two immediately
preceeding financial years and has not made any application within such period for obtaining
the status of a dormant company under section 455.
If the name of the company is so removed from the register of companies, it
automatically goes into liquidation However, the company may apply to the Tribunal against
the removal of its name from the register of companies by the Registrar. If the Tribunal is
satisfied with the argument, given by company that the company was a going concern at the
time when its name was removed from the register of companies by Registrar, the Tribunal
may order the Registrar of companies to re-enter the name of company into register of
companies. In this case, the removal of the name of company by the Registrar will not be
effective. (Section 252)
(b) Dissolution by the order of Tribunal: Section 232 of the Indian Companies Act, 2013
states that a Tribunal may order for the dissolution of a company, on the re-organization or
re- construction of the company or on the amalgamation of two companies. On such order of
the Tribunal, the company is dissolved.)
(c) Dissolution by liquidation: When the liquidator or the company has completed all the
formalities of the winding up of the company, the company is taken to be dissolved.
Difference between winding up and dissolution

Particulars Winding-up Dissolution

 Winding up means appointing a liquidator to sell Dissolution means to dissolve the
off the assets of the company, divide the proceeds company completely. Any further
Meaning
among creditors, and file to the NCLT for operations cannot be done in the
dissolution. company name.

Dissolution is the end process/result

Winding up is one of the methods through which of winding up and getting the name
Process
the dissolution of a company is carried on. stuck off from the Register of
Companies.

The legal entity of the company continues and

Existence of The dissolution of the company brings
exists at the commencement and during the
Company an end to its legal entity status.
winding-up process.

A company can be allowed to continue its

Continuation of business during the winding-up process if it is The company ceases to exist upon its
Business required for the beneficial winding up of the dissolution.
company.

The liquidator carries out the process of winding The NCLT passes the order of
Moderator
up. dissolution.

Filling of winding up resolution or petition, the

Filing of resolutions, declarations, and
Activities appointment of the liquidator, receiving
other required documents to the
Included declarations, preparation of reports, disclosures to
NCLT to pass dissolution order
ROC, and filing for dissolution to the NCLT.

National Company Law Appellate Tribunal (NCLAT)

The central government has to establish an appellate tribunal known as National Company
law Appellate Tribunal. It has to consist of a chairman, judicial and technical members not
exceeding eleven. It has to hear appeals against the orders of the tribunal.
Contributory
It refers to a person are liable to contribute to the assets of the company in the event of
winding up. For the purpose of winding up shareholder is described as contributory.
Fraudulent preference
Fraudulent preference refers to a situation where a debtor transfers assets or makes payments
to a preferred creditor with the intent to defraud other creditors.
Liquidation Dividend
A liquidation dividend refers to the distribution of funds or assets to creditors and
shareholders during the winding up or liquidation process of a company, after all liabilities
and expenses have been settled.
Committee of inspection
It is a group of people who represent the interest of creditors of a company that can no longer
pay its debts and is being wound up by liquidation.
Preferential Payments
Preferential payments are the first payments made by the company; they have to be paid in
priority to all other debts. These payments include:
1. All revenues, taxes cesses and rates payable to Government or local authorities within 12
months before the date of commencement of winding up.
2. All wages or salaries or commission to the employees for services rendered to the company
for a period not exceeding four months within twelve months before the relevant date, subject
to the condition that the amount payable in these cases to any workmen shall not exceed such
amounts as may be notified.
3. All accrued holiday remuneration due to an employee or in the case of his death, to his
legal representatives, on the termination of his employment before, or by the winding up
order, or, as the case may be the dissolution of the company.
4. All amounts due in respect of contributions payable during the period of twelve months
immediately before the winding up under the Employees' State Insurance Act, 1948, or any
other law.
5. All amounts due in respect of any compensation or liability for compensation under the
Workmen's Compensation Act 1923 of the company in respect of the death or disablement of
any employee of the company.
Committee of inspection (COI)
A committee of inspection (COI) is a group of creditors who represent the interests of
creditors during a company's external administration. The COI advises and assists the
external administrator, and can approve or request certain actions. A committee of inspection
can exercise control over the liquidator and also protect the rights of the company's creditors.
In particular, the committee can hold the liquidator to account in relation to the selling of
assets, the level of fees the liquidator charges and other such matters.
Global Depository Receipt (GDR)
A Global Depository Receipt (GDR) is a financial instrument that allows a company to raise
capital from investors in multiple countries. GDRs are issued by a foreign bank and represent
ownership in a foreign company. They are traded on the local stock exchanges of the
investors' countries.
Fraudulent Preference
When a corporation does anything or suffers something as a result of fraudulent conduct that
may assist a person in standing out in a stronger position throughout the winding up, this is
referred to as a “fraudulent preference” granted by the company.
Liquidation Dividend
A liquidation dividend is a distribution of a company's assets to its shareholders when the
company is winding down or ceasing operations. It's also known as a liquidating distribution
or terminal distribution.