WINDING UP OF A

COMPANY

Farzana Yeasmin Mehanaz

Faculty of Law
Eastern University
Winding up of a Company
 Winding up of a company is the process whereby its life is ended i.e. , the
company dissolved and its property administered for the benefit of its
creditors and members.
 Modes of Winding up
According to sec.234 of the companies Act, 1994 a company may be wound
up in any one of the three ways-
(I) compulsory winding up i.e. by Court;
(II) voluntary winding up;
(III) voluntary winding up subject to the supervision of the Court.
I. Winding up by the Court /Compulsory Winding up (S.241)

Grounds on which company may be wound up by the

court:-
(a) If the company has, by special resolution, resolved that
the company be wound up by the Court;
(b) If default is made in delivering the statutory report to
the Registrar or in holding the statutory meeting, where
applicable; but petition should be filed within 14 days;
Cont…
(C) If the company does not commence its business within a year
from its incorporation, or suspends its business for a whole year;
(D) If the number of members is reduced
 In case of a private company - below 2
 In case of any other company - below 7; or
Cont...
(E) If the company is unable to pay its debts;
(F) If the Court is of opinion that it is just and equitable that the company
should be wound up.
S.243: Winding up may be referred to District Court - Where the High
Court Division makes as order for winding up of a company under this Act
it may, if it thinks fit, direct all subsequent proceedings to be had in a
District Court, and thereupon such District Court shall for the purpose of
winding up the company, be deemed to be "the Court" within the
meaning of this Act and shall have, for the purposes of such winding up,
all the jurisdiction and powers of the High Court Division.
Effect & Commencement of Winding up
S.246: Effect of winding up order
An order for winding up of a company shall operate in favour of
all the creditors and all the contributories of the company as if
made on the join petition of a creditors and of a contributories.
S.247: Commencement of winding up by Court
A winding up of a company by the Court shall be deemed to
commence at the time of the presentation of the petition for the
winding up.
WHO MAY PETITION FOR THE WINDING UP(S.245)

 An application to the Court for the winding up of a company

shall be by petition presented, subject to the provisions of this
section, either
 by the company; or
 by any creditor or creditors, including any contingent or
prospective creditor or creditors, contributory or
contributors; or
 by all or any of those parties, together or separately; or
 by the Registrar.
Cont…
Provided that–
(a) a contributory shall not be entitled to present a petition for winding up a
company, unless–
(i) either the number of members is reduced in the case of a private
company, below two, or, in the case of any other company, below
seven; or
(ii) the shares in respect of which he is a contributory or some of them
either were originally allotted to him or have been held by him, and
registered in his name for at least six months during the eighteen
months before the commencement of the winding up, or have
devolved on him through the death of a former holder;
Cont…
(b) the Registrar shall not be entitled to present a petitions for
winding up a company–
(i) except on the ground from the financial condition of the
company as disclosed in its balance sheet or from the report of an
inspector appointed or, in a case it appears that the company is
unable to pay its debts; and
(ii) unless the previous sanction of the Government has been
obtained to the presentation of the petition:
Provided that no such sanction shall be given unless the company
has first been afforded an opportunity of being heard.
Cont…
(c) a petition for winding up of a company on the ground of default in filing
the statutory report or in holding the statutory meeting shall not be presented
by any person except by a shareholder, nor before the expiration of
fourteen days after the last day on which the meeting ought to have been
held;
(d) the Court shall not give a hearing to a petition for winding up of a
company by a contingent or prospective creditors until such security for
costs has been given as the Court thinks reasonable and until a prima facie
case for winding up has been established to the satisfaction of the Court.
Court May Grant Injunction (S.248)

 The Court may, at any time after the presentation of the petition
for winding up of a company under this Act and before making
an order for winding up the company, upon the application of
the company or of any creditor or contributory of the company,
restrain further proceedings in any suit or proceedings against
the company and may also pass other similar order upon such
terms as the Court thinks fit.
Powers of Court on Hearing Petition (S.249)
 Notices issued to all concerned parties. Before hearing the
petition the provisional liquidators are appointed to safe guard
the assets of the company.
 On hearing the petition the court may dismiss it, with or
without costs, adjoin the hearing conditionally or
unconditionally, make any interim order that it thinks fit, make
an order for winding up the company with or without costs or
any other order that it thinks fit.
Consequences of Winding Up Order
 The court must, as soon as the winding up order is made, cause intimation
thereof to be sent to the official liquidator and the registrar.
 The order shall be reported within fifteen days of the making thereof by the
official liquidator to the Registrar, who shall record in his make books a minute
of the dissolution of the company. the registrar should take the minutes in his
book and notify in the official Gazette that such order has been made (S.277).
 If the official liquidator makes default in complying with the requirements of
section 277, he shall be liable to a fine not exceeding one hundred taka for
everyday during which he is in default.
 The order for winding up is deemed to be a notice of discharge to the officers
and the employees except when the business is continued.
Cont…
 Suits against the company are stayed, unless the court gives leave to
continue or commence proceedings.
 All power of the board of directors cease and the same are then exercised
by the liquidator.
 On the commencement of the winding up the limitation ceases to run in
favor of the company.
 Any disposition of the property of the company and any transfer of
shares in the company are then void. the official liquidator, by virtue of
his office becomes the liquidator of the company and takes possession
and control of the assets of the company.
Cont…
 Any distress or execution put in force without the court orders are void.
 Any type of sale or floating charge created within the period of proceedings are void.
 Statement of affairs to be made to the liquidator.
 Order of Dissolution by the Court – S.277(1)
When the affairs of a company have been completely wound up, the Court shall make an
order that the company be dissolved from the date of the order, and the company shall be
dissolved accordingly. Thereafter the company has no existence.
Powers of official liquidator (S.262)
 The official liquidator shall have power with the sanction of the Court, to do the following things-- (a)
to institute or defend any suit or prosecution, or other legal proceeding, civil or criminal, in the name
and on behalf of the company;
(b) to carry on the he business of the company so far as may be necessary, for the beneficial winding
up of the same,
(c) to sell the immovable and movable property of the company by public auction on private contract,
with power to transfer the whole thereof to any person or organisation or company, or to sell the same in
process.
(d) to do all acts and to execute, in the name and on behalf of the company, all deeds, receipts, and
other documents, and for that purpose to use, when necessary the company's common seal;
(e) to prove, rank and claim in the insolvency of any contributory, for any balance a against his
estate, and to receive dividends in the insolvency, in respect of that balance, as a separate debt due from
the insolvent, and rateably with the other separate creditors;
Cont…
(f) to draw, accept, make and endorse any bill of exchange, hundi or promissory note in the name and on
behalf of the company, with the same effect with respect to the liability of the company as if the bill, hundi
or note had been drawn, accepted, made or endorsed by or on behalf of the company in the course of its
business;
(g) to raise on the security of the assets of the company any more requisite;
(h) to take out in his official name letters of administration relating to the estate of any deceased
contributory or his estate which cannot be conveniently done in the name of the company, and in all such
cases the money due shall, for the purpose of enabling the liquidator to take out the letters of
administration or recover the money be deemed to be due to the liquidator or himself;
Provided that nothing in clause (h) shall be deemed to affect the rights, duties and privileges of the
Administrator General appointed under the Administrator General's Act, 1913(III of 1913);
(i) to do all such other things as may be necessary for winding up the affairs of the company and
distributing its assets.
Powers of Court
S.253: Power of Court to stay winding up
The Court may, at any time after an order for winding up, on the application of any creditor or
contributor, and on proof to the satisfaction of the Court that all proceedings in relation to the winding up
ought to be stayed, make an order staying the proceedings, either altogether or for a limited time, on such
terms and conditions as the Court thinks fit.

S.285: Appeal from orders

Re--hearing of, and appeals from order or decision made or given in the matter of the winding up of a
company by the Court may be had in the same manner and subject to the same conditions in and subject
to which appeals may be had from any order or decision of the same Court in cases within its ordinary
jurisdiction.
II. VOLUNTARY WINDING UP
 Voluntary Winding up - Winding up by the members or creditors without any
intervention of the Court is called voluntary winding up.
As per section 286, (1) A company may be wound up voluntarily—
(a) when the period, if any, fixed for the duration of the company by the articles expires, or
the even, if any occurs, on the occurrence of which articles provide that the company is
to be dissolved and the company in general meeting has passed a resolution requiring
the company to be wound up voluntarily;
(b) if the company resolves by special resolution that the company be wound up
voluntarily;
(c) if the company resolves by extraordinary resolution to the effect hat it cannot by reason
of its liabilities continue its business, and that it is advisable to wind up.
(2) The expression "resolution for voluntarily winding up" when used hereafter in this Part
means a resolution passed under clause (a), clause (b), or clause (c) of this section.
Cont…
S.287: Commencement of voluntary winding up -- A voluntary winding up shall be deemed to commence at
the time of the passing of the resolution for voluntary winding up.

S.288: Effect of voluntary winding up on status of company –

When a company is wound up voluntarily, the company shall, from the commencement of the winding up, cease
to carry in its business, except so far as may be required for the beneficial winding up thereof:

Privided that the corporate state and corporate powers of the company shall, notwithstanding anything to the
contrary in its articles, continue until it is dissolved.

S.289: Notice of resolution to wind up voluntarily –

(1) Notice of any special resolution or extraordinary resolution for winding up a company voluntarily shall be
given by the company within ten days of the passing of the same by advertisement in the official Gazette, and
also in some news paper, if any circulating in the district where the registered office of the company is situate.

(2) If a company makes default in complying with the requirements of this section, it shall be liable to a fine not
exceeding on hundred taka for every day during which the default continues; and also every officer of the
company who knowingly and wilfully authorises or permits the default shall be liable to a like penalty.
Consequences of Voluntary Winding-up
 Members' Voluntary Winding up – Ss.292-296.
 Creditor's voluntary winding up – Ss. 298-305.
General provision for voluntary winding up
S.306: Provisions applicable to every voluntary winding up –
The provisions contained in section 307 to 314, both inclusive, shall apply to every
voluntary winding up whether a members or a creditors winding up.
III. Winding Up Subject to Supervision of
Court
S.316: Power to order winding up subject to supervision –
when a company has by special or extraordinary resolution, resolved to wind up voluntarily the Court may
make an order that the voluntary winding up shall continue, but subject to such supervision of the Court,
and with such liberty for creditors, contributories; or other to apply to the court and generally on such
terms and conditions as the court thinks just.
S.317: Effect of petition for winding up subject to supervision –
A petition for continuance of voluntary winding up subject to the supervision of the Court shall, for the
purpose of giving jurisdiction to the court over suits, be deemed to be petition for winding up by the court.
S.318: Court may have regard to wishes of creditors and contributories –
The Court may, in deciding between a winding up by the Court and winding up subject to supervision, in
the appointment of liquidators, and all other matter relating to the winding up subject to supervision have
regard to the wishes of the creditors or contributories; as proved to it by any sufficient evidence.
Cont…
S.319: Power of Court to appoint and remove liquidators –
(1) Where an order is made for a winding up subject to supervision, the Court may by
the same or any subsequent order appoint any additional liquidator.
(2) A liquidator appointed by the Court under this section shall have the same powers,
be subject to the same obligations and in all respects stand the same position as if he
had been appointed by the company pay.
(3) The Court may removed any liquidator so appointed by the Court or any liquidator
continued under the supervision order and fill and vacancy occasioned by the
removal or by death or resignation.
Cont…
S.320: Effect of supervision order –
(1) Where an order is made for a winding up subject to supervision, the liquidator may, subject to any restrictions
imposed by the Court, exercise all this powers, without the sanction or intervention of the Court , in the same
manner as if the company were being wound up altogether voluntarily.
(2) Except as provided in sub-section (1) , and save for the purposes of section 279, any order made by the Court for a
winding up subject to the supervision of the Court shall for all purposes, including the staying of suits and other
proceeding, be deemed to be an order of the court for winding up of the company by the Court and shall confer full
authority on the Court to make calls or to enforce calls made by the liquidators, and to exercise all other powers
which it might have exercise if an order had been made for winding up the company altogether by the Court.
(3) In the construction of the provision whereby the Court is empowered to direct any act or thing to be done to or in
favour of the official liquidator, the expression “official liquidator” shall be deemed to mean the liquidator
conducting the winding up subject to the supervision of the Court.
S.321: Appointment of liquidators subject to supervision to the office of official liquidators –
Where an order has been made for the winding up of a company subject to supervision, and order is afterwards made
for winding up by the Court, the Court may, by the last--mentioned order or by any subsequent order, appoint the
liquidators for the first mentioned winding up or any of them either provisionally or permanently, and whether with or
without the addition of any other person, to be official liquidator in the winding up by the Court.