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Commercial Correspondence and Secretarial Practice · Class 12 Commerce

Ch 7Dissolution of a Company — Class 12 Commercial Correspondence and Secretarial Practice, concept-first.

Every company that is registered under the Companies Act, 2013 is, in the eyes of law, a separate legal person distinct from its members. Just as this legal personality is created by registration, it can also be brought to an end through a legal process.

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Key concepts

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Winding Up and Dissolution — Meaning and Distinction

Winding up is the process by which a company's assets are realised, its liabilities are paid off out of the proceeds, and any surplus is distributed among its members, all under the charge of a liquidator.

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Chapter contents

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1

Meaning of Winding Up and Dissolution

Every company that is registered under the Companies Act, 2013 is, in the eyes of law, a separate legal person distinct from its members.

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Modes of Winding Up: The Current Legal Position

Many older descriptions of this topic list two broad modes of winding up a company under the Companies Act, 2013 — winding up by the Tribunal and voluntary winding up — with voluntary winding up furth…

3

Winding Up by the Tribunal under the Companies Act, 2013

Winding up by the Tribunal is a compulsory process — the company does not choose it for itself; rather, it is ordered by the National Company Law Tribunal (NCLT) after hearing a petition.

4

Voluntary Liquidation under the Insolvency and Bankruptcy Code, 2016

Where a company is solvent — that is, it is fully able to pay off all its debts — but its members nevertheless decide that it should be wound up (for example, because its business purpose is over, or…

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The Company Liquidator: Appointment, Powers and Duties

Whichever route a company's winding up follows, the actual work of collecting assets, settling claims and closing the company's affairs is carried out by a liquidator — called the Company Liquidator i…

6

Order of Payment of Debts and Distribution of Assets

One of the liquidator's most important duties is to ensure that, once the company's assets are realised, they are applied to pay off claims in the correct order of priority — a company's assets are ra…

7

Striking Off the Name of a Defunct Company — Section 248

Formal winding up through the Tribunal is a fairly long and expensive process. For a genuinely defunct or inactive company — one with no real business, few or no assets, and no significant liabilities…

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Final Dissolution of the Company

Whichever route has been followed, the process of the winding up and dissolution of a company ends the same way: with the company's complete legal death.

Exercises

+Show 14 questions14 questions
  1. Q1What do you understand by the term "winding up" of a company?Free
  2. Q2Distinguish between winding up and dissolution of a company.Free
  3. Q3State the modes of winding up of a company recognised under the current legal framework in India.Free
  4. Q4Why is voluntary winding up no longer dealt with under the Companies Act, 2013? Explain briefly.Preview
  5. Q5What were "members' voluntary winding up" and "creditors' voluntary winding up" under the earlier legal framework, and how has the law chang…Preview
  6. Q6State any four grounds on which a company may be wound up by the Tribunal under Section 271 of the Companies Act, 2013.Preview
  7. Q7Who can file a petition for winding up of a company before the Tribunal?Preview
  8. Q8Explain briefly the "just and equitable" ground for winding up of a company by the Tribunal.Preview
  9. Q9What is meant by voluntary liquidation of a company under the Insolvency and Bankruptcy Code, 2016? State the conditions to be satisfied bef…Preview
  10. Q10Explain the role of the declaration of solvency in a voluntary liquidation.Preview
  11. Q11Who is a Company Liquidator? State any four of his powers or duties.Preview
  12. Q12Explain the order of priority in which the debts of a company are generally paid on its winding up or liquidation.Preview
  13. Q13What is meant by "striking off" the name of a company under Section 248 of the Companies Act, 2013? How does it differ from winding up?Preview
  14. Q14When is a company said to be dissolved? State the effects of dissolution.Preview

Sample & Board Papers

Sample papers and previous-year board questions for this subject.

+Show 12 questions12 questions
  1. Q1Who can demand liquidation of the company? (a) Shareholder (b) Debenture holder (c) Registrar (d) PublicPreview
  2. Q2Within how many days should the appointment of a liquidator be informed to the Income Tax Officer? (a) 15 days (b) 30 days (c) 7 days (d) 14…Preview
  3. Q3Write down the modes of Liquidation.Preview
  4. Q4Write about the circumstances for voluntary liquidation.Preview
  5. Q5In how many parts is the company's voluntary liquidation divided? (a) (A) 2 (b) (B) 3 (c) (C) 4 (d) (D) 1Preview
  6. Q6For winding up, what is the minimum number of members for private company? (a) (A) Less than 7 (b) (B) Less than 3 (c) (C) Less than 2 (d) (…Preview
  7. Q7Whose power is ceased after the appointment of liquidator?Preview
  8. Q8Explain the circumstances for voluntary liquidation.Preview
  9. Q9Who prepares the declaration of insolvency? (a) (A) Directors (b) (B) Creditors (c) (C) Members (d) (D) CourtPreview
  10. Q10Within how many days should the appointment of a liquidator be informed to the Income Tax Officer? (a) (A) 15 days (b) (B) 30 days (c) (C) 7…Preview
  11. Q11Give the meaning of voluntary liquidation by members.Preview
  12. Q12Discuss the procedure of voluntary liquidation by creditors.Preview