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How dissolution is brought about

How dissolution is brought about:

A company, being a body corporate, continues in existence until it is dissolved according to law. Dissolution can be brought about in the following ways.

a. By removal of the company’s name from the register by the Registrar (without winding-up order) (Section 560): Explanation to this section is covered in Para 10.4 i.e. General Provisions on Winding Up.

b. By order of the Court or the order of the Central Government under Section 396: A company whose undertaking is being transferred to another company under a scheme in accordance with Section 394 may be dissolved by an order of the Court [Section 394 (1) (iv)].

The dissolution of existing two or more companies may take place when the Central Government, by virtue of Section 396, orders the amalgamation of the said existing companies in to a new single company in the public interest.

c. By winding- up : This method is by far the most common one and is followed when for any reason other than those mentioned above, the company’s existence is not desired or cought to be terminated e.g., because the object for which the company had been formed has been accomplished, or because the company is insolvent.

d. Effect of dissolution: “The dissolution puts an end to the existence of the company. Unless and until it has been set aside, it prevents any proceeding being taken against promoters, directors, or officers of the company to recover money or property due or belonging to the company, or to prove a debt due from the company. Where, the company is dissolved, the statutory duty of the liquidator towards the creditors and contributories is gone; but if he has committed a breach of his duty to any creditor by distributing the assets without complying with the requirements of the Act, he is liable to damages to the creditor”. (Halsbery‟s Laws of England, 3rd Edn. Vol. VI, Page, 370); Kanhaiya Lal Bhargava vs. Official Liquidator (1965) 35 Comp. Cas. 340)

e. Revival of company after dissolution: Where a company has been struck off the register, the company, or any member or creditor who feels aggrieved, may, within 20 years from the gazetting of the notice, apply to the court to have the company restored to the register. If the Court is satisfied that the company was carrying on business or was in operation when struck off or that it is otherwise just that it be restored to the register, it may make an order accordingly. When a certified copy of this order is delivered to the Registrar for registration, the company would be deemed to have continued in existence as if its name had not been struck off.

A letter or notice referred to above may be addressed to the company at its registered office. If there is no such office, it may be addressed to the company to the care of some director or other officer of the company. If there is no such director or officer whose name and address is known to the Registrar, it may be sent to each of the persons who subscribed to the memorandum at the address mentioned in the memorandum [Section 560].

f. Revival of defunct company under Section 560 and dissolved company under Section 559:

Section 559 Section 560
(i) Application for revival must be presented by the liquidator or other person who appears to the Court to be interested.

(ii) Limitation period for application is 2 years of the date of the dissolution.

(iii) Acts done after dissolution and before revival are not validated by order of revival.



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