Winding up of a Company

Winding up of a company means the end of the life of a company. It is the permanent closing down of its business.

A company is the creature of law. It, therefore, cannot die a nature death. The termination of its existence is affected by law. Thus winding up of the company is a legal procedure in which all the affairs of the company are wound up its assets and liabilities are determined assets are sold out and claims of the creditors met out of sale proceeds. The balance if any is distributed among shareholders in proportion of their shareholdings. This work is done the liquidator.

Methods or modes of winding up of A Company.

According to the companies ordinance 1984 a company can be wound up in the following three ways or you can say these are the types of winding up of a company.

1. Winding up by court
2. Voluntary winding up
3. Winding up subjects to the supervision of the court.

Difference between three modes of winding up of a company:

1.) Winding up of a company by the court.

The main grounds for winding up by the court are as under;

1. By special resolution: A special resolution has been passed by the company to be wound up by the court.
2. Default in delivering statutory report: A public company is wound upon the ground that it has not held. Statutory meeting and submitted statutory report to the registrar or has not held two consecutive annual general meetings.
3. Delay in commencement of Business is another ground: If a public company does not commence business within one year of the date of its incorporation or suspends business for a whole year, the court may order its winding up.
4. Members reduced below a minimum. A public company may be wound up if its members are reduced below seven.(Less than two in case of private company Ltd.)
5. Failure to pay a debt. A public company may be wound up by the court; if it is proved that it is unable to pay its debts.
6. Ceases to be a listed company: the court may wind up a company if it ceases to be a listed company.

2.) Voluntary winding up of a company.

The voluntary winding up of the company is of two kinds

1. Members voluntary winding up

• Expiry of period
• By special resolution
• Declaration of solvency
• Appointment of liquidators
• Final meeting and dissolution

1. Creditor’s voluntary winding up.

A winding up in the case of which a declaration of solvency has not been delivered to the registrar is known as creditor’s voluntary winding up. The company calls a meeting of its creditors and appoints a liquidator.