Winding up of Company

Winding up of Company
Meaning:
The winding up a company means the process by which a
company is dissolved.
A company is created by legal procedure and it comes to an end
through a legal procedure. Winding up is the process by which
the management of the company is taken from the directors,
assets are sold by liquidator and debts are paid off. Any
remaining balance is divided among the members. The winding
up of the company is also called liquidation.
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Liquidator:
A person appointed to carry out the winding up of a company is called liquidator.
The duty of liquidator is to sell the property of the company, pay its debts, and
distribute the surplus among the members. The following are powers of
liquidator (sec. 337).

 To carry on the business of the company if it is necessary for the winding up of

the company.
 To do all acts and execute all deeds, receipts, and other documents in the
name of the company and use the company’s seal.
 To sell movable and immovable property of the company by public auction or
private contract.
 To sell whole of the business of the company as a going concern.
 To file or defend any suit or legal proceeding on behalf of the company.
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 To settle claim of creditors, employees or any other claimant and distribute
sale proceeds in accordance with priorities established under the act.
 To draw, accept, make and endorse any negotiable instruments in the name
of company.
 To obtain any professional assistance from any person or appoint any
professional.
 To appoint an advocate entitled to appear before the court or such person
to assist him in the performance of his duties.
 To take all such steps or sign, execute and verify any paper, dead document,
application, petition, affidavit, bond or instrument as may be necessary:
 For winding up of the company
 For distribution of assets
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 To discharge his duties and obligations and functions as
official liquidator
 To apply to the court for such orders as may be necessary for
the winding up the company
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Contributory:
A term contributory means a person liable to contribute to the
assets of the company in the event of its being wind up. A
person is holding fully Paid up sharesin the company is a
contributory.
The followings persons are liable to contribute.
1: present and past members
In the event of winding up, every present and past members
shall be liable to contribute to the assets of the company for
payment of debts and liabilities and costs, charges and expenses
of winding up. The following rules apply:
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 A past member shall not be liable if he has ceased to be member for 1 year or
more before the commencement of winding up.
 A past member shall not be liable in respect of any debt or liability of the
company contracted after he ceased to be a member.
 A past member shall not be liable unless it appears to the court that present
members are unable to satisfy the contributions required by them.
 In the case of company limited by guarantee, no contribution shall be required
from any past or present members.
 A sum due to any member by way of dividends, profits or otherwise shall not
be deemed to be a debt of the company in case of competition between
member and creditor of the company.
 In the company limited by guarantee having share capital, every member shall
be liable to the amount undertaken to be contributed to the assets of the
company at the time of winding up.
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2: Directors having unlimited liability:
In winding up of a limited company, any past or present director whose
liability is unlimited shall be liable to contribute as an ordinary member
and to contribute further as if he were member of an unlimited
company, provided that:
A past director shall not be liable to make further contribution if he
ceased to hold office for 1 year or more before the commencement of
winding up.
A past director shall not be liable to make further contribution in
respect of any debt or liability contracted after he ceased to hold office.
A director shall not be liable to make further contribution, subject to
articles, unless the court require him contribute.
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3: Death of contributory:
If a contributory dies, his legal representative shall be liable to
contribute to the assets of the company.
4: insolvency of contributory:
If a contributory becomes insolvent, his assignee in insolvency
shall be the contributory. The assignee shall be liable to
contribute out of the assets of the insolvent.