Procedure of members’ voluntary winding-up:
The procedure for a member’s voluntary winding-up of a company is narrated below:
(i) At the Board’s meeting, the directors have to make a declaration of solvency under Section 488 of the Companies Act, 1956. If there are more than 2 directors then the said declaration must be made by a majority of them. This declaration has to be filed with the Registrar of Companies together with the auditor’s report on the balance sheet and profit and loss account or income and expenditure account of the company made upto the date of the Board’s meeting, the time limit for such filing being 5 weeks before the passing of the resolution for the winding-up.
(ii) Next, the company has to pass at its general meeting a special resolution called “resolution for voluntary winding-up” (Section 454). At this very meeting or at any meeting subsequent thereto, one or more liquidators are to be appointed by the company; also his or their remuneration, if it is to be given, should be fixed at the said meeting (Section 490).
(iii) Under Section 485, the aforesaid resolution to wind-up the company voluntarily has to be published in Official Gazette as also in a newspaper circulating in the district where the Registered Office of the company is situated. This is required to be made within 14 days of the passage of the resolution.
(iv) Under Section 493, the company has to give notice of appointment of the liquidator to the Registrar. The notice is to be given in form No. 36(b) of the Companies (Central Government’s) General Rules and Forms. The liquidator has also to separately notify the Registrar, under Section 516, about his appointment.
(v) The liquidator is then required to do the following things, namely, speedy realisation of assets, preparation of list of creditors, admission of proof, settlement of lists of contributories, making of such calls as are necessary, payment to secured creditors of costs including the liquidator’s own remuneration, payment of preferential claims and distribution of the surplus pro rata amongst the contributories after meeting all the claims of creditors and after adjusting all rights and claims. For resolving any doubts and difficulties, application may be made to the Court.
(vi) Duty of liquidator to call general meeting: In the event of a voluntary winding-up being continued for more than a year, the liquidator shall call a general meeting of the company at the end of the first year from the commencement of the winding-up and at the end of each succeeding year within three months from the end of each or such longer period as the Central Government may allow. Also, he shall lay before the meeting an account of his acts and dealings and of the conduct of the winding-up during the preceding year together with a statement in the prescribed form containing stipulated particulars in respect of winding-up proceedings and the position of the liquidation. Any failure on the part of the liquidator in complying with these provisions shall render him liable to a fine to the extent of ` 1000 in respect of each failure (Section 496). The liquidator has to keep all moneys in a scheduled bank; he must strictly adhere to the provisions of Section 553 . Where the winding-up of a company is not concluded within one year after its commencement, Section 551 requires that a statement in the prescribed form by the liquidator should be filed with the Registrar within 2 months of the close of such year (if he is not exempted from so doing by the Central Government) and thereafter until the winding-up is concluded, at intervals of not more than one year or such shorter interval as may be prescribed. The statement should be audited by a chartered accountant.
(vii) Final meeting and dissolution: When the winding-up is complete, the liquidator shall, subject to the provisions contained in Section 498, make-up an account of the winding-up which must show as to how the winding-up has been conducted and the property of the company has been disposed of, also he shall call a general meeting of the company to place before it the account. Such a meeting is required to be called by advertisement which must specify the time, place and object of the meeting and published, not less than one month before the meeting, in the Official Gazette as well as some newspapers circulating in the district where the registered office of the company is situated. Besides, he shall, within one week of the meeting, send to the Registrar and the Official Liquidator a copy of the account and also a return to each of them as regards the holding of the meeting and of the date thereof [Section 497(2) & (3)]. Where the meeting is not held for want of quorum, the liquidator shall, instead of the said return, make a return, to the effect that the meeting was duly called but no quorum was present thereat [Section 497(4)]. Upon receiving the account and either of the returns under Sub-section (3) or (4), the Registrar must immediately register them, with a view to ensuring that the winding-up process of the companies which have been voluntarily wound-up should not be conducted in a manner prejudicial to the interest of the shareholders or of the public.
On receipt of the final statement of accounts and the returns from the liquidator, the Official Liquidator shall make a scrutiny of the books and papers of the company. For the purpose, he shall be provided with all reasonable facilities by the liquidator and all officers (past and present) of the company.
Where the Official Liquidator, after scrutiny of the returns and accounts, reports to the Court that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members to public interest, the company is deemed to have been dissolved from the date of the submission of the report.
If the official Liquidator, on such a scrutiny, reports to the Court that the affairs of the company have been conducted in a manner prejudicial to the interest of its members or the public, the Court shall direct the Official Liquidator to make a further investigation into the affairs of the company, and for that purpose, he shall be invested with all such powers as the Court may deem fit [Section 497(6A)I. On receipt of the report as regards further investigation, the Court may either make an order that the company shall stand dissolved with effect from the date which it shall specify or shall make such other order as the circumstances of the case might justify [Section 497(6B)].