Question

1. In March 2020, due to Corona Virus Pandemic, Intelligent consolidated group is likely to wind up, discuss the two possible approaches of “winding up” companies.

Answer 1

Ans- A company is an artificial person and thus its life can be brought to an end by process of law. This process of giving an end to the life of company is called winding up, it is a process in which

a) The management of a company is taken out of its directors hands

b) Its assets are realised by a liquidator

c) Its debts and liabilities are discharged out of proceeds of realisation

d) Any surplus of assets remaining is returned to its members or shareholders

Thus it is the process involves realisation of assets, payment of liabilities and distribution of surplus, if not amongst members of company

Modes of winding up of company

Normally there are two modes of winding up namely

a) By the court

b) Voluntary

Winding up by court-   It is also called compulsory winding up , the court can order to wind up the company up on receiving a petition , circumstances under which compulsory winding up may take place are

a) Company itself has resolved to wound up by court by passing required resolution

b) Company has acted against interest of sovereignty and integrity of its parent country

c) On application made to court or proper authority that

     i) Affairs of company have been conducted in fraudulent manner

     ii) Company was formed for unlawful purpose

    iii) Any person who is involved in formation or management of its affairs have been guilty of fraud ,        misfeasance or misconduct

d) Court or proper authority has opinion just and equitable

     i) Deadlock in management

     ii) Loss of substratum (purpose of formation)

    iii) Illegal objects or fraud

Voluntary winding up- Any company whom intends to wound up itself and meets conditions and procedural requirements prescribed by law, may initiate voluntary winding up

Members of a company may initiate for voluntary winding up

i) By passing required resolution

ii) When the company is formed for a specific purpose and the purpose is achieved

iii) When the company is formed for a certain period of time and time has elapsed

iv) Any other valid reason