Effects of voluntary winding-up:
With the commencement of voluntary winding-up, the following situations arise
(1) The company ceases to carry on its business except for the purposes of beneficial winding-up of such business (Section 487). It still maintains its corporate personality and its corporate power, until it is dissolved (Section 487). This is so even if the Articles provide to the contrary [Hari Prasad Jayantilal & Co. vs. I.T.O. Ahmedabad.9.LR. (1966) S.C 148.11. The liquidator represent the company in liquidation and the functions as its agent for purposes of winding-up [Official Liquidator vs. Commissioner of Income Tax (1971) 41 Comp. Cas. 226].
(2) Any transfer of shares made without the sanction of the liquidator is invalid and alteration in the status of the members made after the commencement of the winding-up is void (Section 536).
(3) On the appointment of a liquidator under Section 490 or 502, as the case may be, the powers of the directors, or managing or whole time director, or manager cease except in so far as the company in general meeting or liquidator, may sanction that the same be continued or for the purpose of giving notice of liquidator’s appointment to the Registrar under Section 493. In the event of a creditors’ winding -up, the powers of directors cease except in so far as the Committee of Inspection, or if there is no such Committee, the creditors in general meeting may sanction that the same may be continued (Sections 491 & 505).
(4) Every invoice, order for goods, or business letter issued by or on behalf of the company or a liquidator or a receiver or manager, in which the company’s name appears must contain a Statement that the company is being wound-up (Section 547).
(5) As to whether a voluntary winding-up discharges the servants of the company, it would depend upon whether the business of the company has ceased or is being continued. Thus, it would depend on the facts of each case. A voluntary winding-up coupled with immediate cessation of the company‟s business has been held to operate as a dismissal of the company’s servants [Reigate vs. Union Mfg. Co. (1981) I.K.B., 592 (Ch. )].
(6) Suits and other legal proceedings against the company are not automatically stayed but an application may be made by the liquidator or any creditor or contributory to the Court to determine any question arising in the winding-up, e.g. enforcing of calls, staying of proceeding or any other matter. Generally, such an application can be made for exercising all or any of the powers which the Court might exercise, if the company was being wound-up by the Court (Section 518).
(7) A voluntary winding-up shall not be a bar, enter alia, to the right of any creditor or contributory to have the company wound-up by the Court; but in the case of such an application the Court shall have to be satisfied that the rights of the creditors or contributories or both would be prejudiced by a voluntary winding-up (Section 440).