WINDING UP / DISSOLUTION OF COMPANIES
What does it mean by “winding up” of a Company:
The term ‘winding up’ of a company may be defined as the proceedings by which a company is dissolved (i.e. the life of a company is put to an end). Thus, the winding up is the process of putting an end to the life of the company. And during this process, the assets of the company are disposed of, the debts of the company are paid off out of the realized assets or from the contributories and if any surplus is left, it is distributed among the members in proportion to their shareholding in the company.
The winding up of the company is also called the ‘liquidation’ of the company. The process of winding up begins after the Court passes the order for winding up or a resolution is passed for voluntary winding up. The company is dissolved after completion of the winding up proceedings. On the dissolution, the company ceases to exist. So, the legal procedure by which the existence of an incorporated company is brought to an end is known as winding up.
A person appointed to carry out the winding up of a company is called liquidator. If the winding up is through Court, the term used for such person is official liquidator. The duties of liquidator include to get in and realise the property of the company, to pay its debts, and to distribute the surplus (if any) among the members. The official liquidator acts under the supervision of the Court, through a recognized reporting system.
MODES OF WINDING UP:
The winding up of a company may be either-
- by the Court; or
- voluntary; or
- Subject to the supervision of the Court.
Winding up/dissolution of company from each above said mode has particular documentary and legal formalities and requirements, which need to be fulfilled in all respects to ensure the completion of process.