Specimen Scheme of amalgamation of
International C.D. Company
Limited with
A.N.D. Company Limited
1. With effect from the
close of business as on the 1st day of August, 1976, (hereinafter called 'the
appointed day') the entire undertaking of International C.D. Company Limited
(hereinafter called 'the transfer company') including all its properties,
movable or immovable and assets, of whatsoever nature, such as industrial and
other licences and quota rights, trade marks and other industrial property
rights, leases, tenancy rights and all other interests, rights or powers of
every kind, nature and description whatsoever (all of which undertaking,
property, assets, rights and powers are hereinafter for brevity's sake referred
to as "the said undertaking") shall without any further act or deed
be and stand transferred to and vested in AND. Company Limited (hereinafter
called "the transferee company" pursuant to section 394 of the
Companies Act, 1956).
2. With effect from the
appointed day, all debts, liabilities, duties and obligations of the transferor
company shall also be stand transferred, without further act or deed, to the
transferee company, pursuant to the said section 394, so as to become the
debts, liabilities, duties and obligations of the transferee company.
3. With effect from the
appointed day, the transferor company shall be deemed to have been carrying on
and to be carrying on all business and activities for and on account of the
transferee company until the said undertaking becomes transferred to and vested
in the transferee company as aforesaid by an order of the High Court of
Judicature at Bombay and otherwise in accordance with the terms of this scheme
and until this scheme finally takes effect in accordance with the terms hereof
and until then the transferor company shall carry on its business with proper
prudence and shall not, without the concurrence of the transferee company,
alienate, charge or otherwise or deal with, during the pendency of the scheme,
the said undertaking or any part thereof except in the ordinary course of
business or vary the terms and conditions of employment of any of its
employees. Profit accruing to the transferor company or losses arising or
incurred by it after the appointed. day up to the date on which this scheme
finally takes effect as aforesaid shall for all purposes be treated as the
profits or losses of the transferee company, as the case may be.
4. Subject to the other
provisions of this scheme, all contracts, deeds, bonds, agreements and other
instruments of whatsoever nature to which the transferor company is a party,
subsisting or having effect immediately before this scheme becomes finally
effective as aforesaid, shall be in full force and effect against or in favour
of the transferee company, as the case may be, and may be enforced as fully and
effectually as if, instead of the transferor company, the transferee company
had been a party thereto.
5. The authorised capital of
the transferor company is Rs. 25,00,000/- (Rupees twenty five lacs)
divided into 25,000 shares of Rs. 100/- (Rupees hundred) each. The
authorised capital of the transferee company is Rs. 4,00,00,000/ 00 (Rupees
four crores only) divided into 34,00,000 equity shares of Rs. 10/-
(Rupees ten) each and 60,000 6.875% taxable cumulative preference shares of Rs.
100/- (Rupees hundred) each. The issued, subscribed and paid-up
capital of' the transferor company is Rs. 20,00,000/- (Rupees twenty
lacs) divided into 20,000 equity shares of Rs. 100/- (Rupees hundred)
each. The issued, subscribed and paid-up capital of the transferee
company is Rs. 2,15,42,600/- (Rupees two crores, fifteen lacs, forty two
thousand and six hundred only) divided into 13,66,980 equity shares of' Rs. 10/-
(Rupees ten) each fully paid-up, 9,74,560 equity shares of Rs. 10/-
(Rupees ten) each, Rs. 5/- (Rupees five) paid-Up and 30,000 6.875%
taxable cumulative preference shares of Rs. 100/- (Rupees hundred) each
fully paid-up.
6. Since the transferee
company holds 78% of the share capital of the transferor company there shall be
no consideration of any nature whatsoever passing from the transferee company
to the transferor company. The remaining shares are, subject to the approval of
the Reserve Bank of India, being purchased by the transferee company. If,
however, Reserve Bank's approval is not received by the transferee company on
or before the effective date the transferee company shall pay to the persons
holding the remaining shares a sum of Rs. 100/- (Rupees hundred) for each
share held by such persons.
7. On the scheme finally
taking effect as aforesaid, all officers and employees of the transferor
company shall be deemed to have become the officers and employees of-the
transferee company with effect from the appointed day and their employment by
the transferee company shall be on the following terms and conditions:
(i) The terms and conditions
of service applicable to such officers and employees shall be not less
favourable than those applicable to them respectively prior to the appointed
day;
(ii) The service of such officers
and employees shall not be treated as having been broken or interrupted for the
purpose of provident fund or gratuity or otherwise and for all Purposes will be
reckoned from the date of their respective appointments with the transferor
company;
(iii) The transferee company
shall be liable to pay and shall pay to each of the said officers and employees
such compensation in the event of the retrenchment of any of them as they may
be entitled to receive according to any agreement between them and the transferor
company or between them and the transferee company, as the case may be, or as
may be required by any law for the time being in force, such compensation to be
paid to each them on the basis that his service has been continuous and has not
been interrupted by virtue of the said undertaking having been taken over by
the transferee company under this scheme.
8. The transferor company
shall, with all reasonable despatch, make an application to the High Court of
Judicature at Bombay for sanctioning this scheme of amalgamation under section
391 of the Act and for an order or orders under section 194 thereof for
carrying this scheme into effect and for dissolution of the transferor company
without winding up. The transferee company shall join in the said application
and if necessary make a similar separate application.
9. The transferor company
(by its Directors) and the transferee company (by its Directors) may assent on
behalf of all persons concerned to any modification or amendments of this
scheme or of any conditions which the Court may deem fit to approve of or
impose and solve all difficulties that may arise for carrying out the scheme
and do all acts, deeds and things necessary for putting the scheme into effect.
10. For the purposes of giving effect to this scheme or to any modifications thereof, the Directors of the transferor company (prior to its dissolution pursuant to this scheme) and of the transferee company may give and are authorised to give such directions and to agree to such terms and conditions as may be necessary, expedient or desirable and to settle any questions of doubt or difficulty whatsoever.
11. This scheme is conditional on and subject to:
(a) The sanction or approval
of the Reserve Bank of India and any of the other authorities concerned being
obtained and granted in respect of any of the matters in respect of which such
sanction or approval be required;
(b) The approval of an
agreement to the scheme by the requisite majorities of the members of the
transferor company and of the members of the transferee company;
(c) The sanction by the High
Court under section 391 of the Companies Act, 1956, both on behalf of the
transferor company and the Transferee Company and to the necessary order or
orders under section 394 of the said Act being obtained.
This scheme shall finally
take effect upon the date on which any of the aforesaid sanctions or approvals
shall be obtained last (hereinafter referred to as "the effective
date").
12. In the event of the said
sanctions and approvals not being obtained and of the scheme not being
sanctioned by the Court and the order or orders not being passed by it as
aforesaid before the 30th day of April, 2000, or within such further period or
periods as may be agreed upon between the transferor company (by its Directors)
and the transferee company (by its Directors), this scheme shall become null
and avoid.
13. All the costs, charges
and expenses of & transferor company and the Transferee Company in respect
of the negotiations leading up to this scheme and to the agreement between the
parties in respect thereof and of carrying out and completing the terms of this
scheme and of the agreement between the parties relating thereto and incidental
to the completion of the amalgamation and merger of the said two companies in
pursuance of this scheme shall be borne and paid on an attorney and client
basis by the transferee company alone.
Approval of Amalgamation scheme
"RESOLVED that subject
to the scheme of Amalgamation between __________________ LIMITED (hereinafter called transferee Company) and the members of the
Company being sanctioned by the Hon'ble High Court of Delhi at New Delhi as per
draft Scheme laid on the Table and initialled by the Chairman for the purposes
of identification with such modifications as may be made by the said High
Court, while sanctioning the scheme approval be and is hereby accorded to the
said scheme for the purpose of Amalgamation of __________________ Limited with the Company, whereby the members of the Company shall
receive at par 83 equity shares of __________________
Limited of Rs. 10/-
each credited as fully paid up for one equity share of Rs. 100/- each
fully paid up, held by them in the company and the transferee Company will
acquire the rights, obligations, assets, liabilities and the entire undertaking
of the Company .
"RESOLVED FURTHER that
the Directors of the Company be and are hereby authorised to do all such acts,
deeds, matters and things as may be necessary, proper and expedient to give
effect to this resolution."
1. Power to amalgamate must appear in Memorandum.-En sure that power to
amalgamate with another company must be contained in the Memorandum of
Association of either Company. If not, then take necessary steps to get the
Memorandum altered.
2. Application to High Court.-File an application to the High Court by way
of Judges Summon in Form 33 of the Companies (Court) Rules, 1959 duly supported
by an affidavit in Form 34 of the Rules.
3. Hearing of application.-Upon hearing of application the Court will
order calling of the meeting of the shareholders, secured creditors, unsecured
creditors etc. and fix day, time and venue of the meetings including quorum for
respective meetings.
4. Appointment of Chairman/Alternate Chairman.-The court will appoint
Chairman and alternate Chairman of the respective meetings and fix their
remuneration.
5. Notice of Meetings.-The notice of the meeting is required to be sent to
the creditors and/or members individually by the Chairman by post under
Certificate of posting to their last known address not less than 21 clear days
before the date fixed for the meeting. The notice is also to be advertised in
such English and Hindi Newspapers as the Court may direct.
6. Result of Meeting to be decided by Poll.-The decisions of meetings on
all resolutions shall be ascertained by taking a poll.
7. Filing of Report by Chairman.-The Chairman is required to
file his report duly supported by affidavit within the period stipulated by the
Court.
8. Petition for confirmation of compromise/arrangement.-The company shall within
seven days of the filing of the report by the Chairman present a petition to
the Court for confirmation of compromise/arrangement.
9. Service of petition to Central Government/Official Liquidator.-Notices are issued by the
Court to the Central Government and Official Liquidator for their report.
10. Filing with Registrar of Companies.-Ensure to file order of the
Court with the Registrar of Companies along with Form No. 21 within thirty days of the order.
11. Words and Expressions.-The use of the phrase "as the case may
be" in subsection (1) of section 391 for the purpose of holding separate
meetings and sub-section (2) for the purpose of agreeing with the
proposed scheme by the requisite majority and its binding effect of being
sanctioned by the court would be superflous. Arbind Mills Ltd. In re, (2002)
111 Com Cases 118 (Guj).
Amalgamation of one or more
companies with the company
"RESOLVED that the
approval of the shareholders of the Company be and is hereby given to the
scheme of amalgamation of M/s. ABC Co. Ltd. with this Company as per the draft
scheme tabled before the meeting and initialled by the Chairman for purposes of
identification with such modifications as may be made in the scheme by the High
Court of Delhi while sanctioning the same."
Other related resolutions in
connection with amalgamation
Special Resolution
"RESOLVED that in
accordance with the scheme of amalgamation approved by the High Court, the
words and figures "Rs. 50,00,000/- divided into 5,00,000" be substituted
by the words and figures '2,00,00,000/- divided into 20,00,000'.
RESOLVED FURTHER that the
above increase in the authorised capital of the company shall become effective
only from the date of the order of High Court confirming the scheme of
amalgamation."
"RESOLVED that subject
to the confirmation of the scheme of amalgamation by the High Court, the
existing article 5 of the Articles of Association of the company be altered in
the manner following:-
"5.The capital of the
company is 2,00,00,000 divided into equity shares of Rs. 20,00,000 of Rs. 10
each"."
1. Dissolution of transferor company without being wound up.-The amalgamating company
i.e. transferor company shall be dissolved without being wound up but before
passing such an order, the High Court will satisfy itself after receiving a
report from the Official Liquidator of the High Court that the affairs of the
transferor company have not been carried on in a manner which is prejudicial to
the interests of the members or to public interest.
2. Calling of Meetings of shareholders etc. by High Court.-Even though the scheme has
been approved by the amalgamating company at their General Meeting before the
petition for amalgamation is presented to the High Court, the High Court shall
satisfy itself by calling meetings of the shareholders/creditors pursuant to
section 391 to be held under the Chairmanship of the persons appointed by the
High Court and on rec6ving their report the scheme will be sanctioned. If the
scheme is bona fide prima facie and is approved by at least 75% of the
shareholders/creditors (value-wise) present at the meeting, the High
Court will approve the scheme. When the scheme is approved, the order of the
High Court is filed with the Registrar of Companies concerned within fourteen
days or such other time as may be prescribed by the High Court.
3. Upon amalgamation properties of transferor company to vest in
transferee company.-Upon amalgamation, the properties of the transferor company shall vest
in the transferee company without the execution of the title deeds and the
capital of the company shall be reorganised in accordance with the scheme. If
there is reduction in capital, the same will also be deemed to have been approved
without following the procedure, pursuant to sections 100- 105 of the
Act.
4. Prior approval of creditors etc.-It will be better to obtain
prior approval from the big creditors, institutions, banks etc.
5. Power to amalgamate must exist in Memorandum of Association.-It may also be ensured that
the object clause of the respective companies authorises amalgamation with
another companies. If not, make such a provision by altering the object clause
pursuant to section 17 of the Act by following the procedure prescribed in the
Practice Notes under earlier Resolution.
6. Scheme to be sanctioned by Court after notice to Central Government.
-Scheme
will be sanctioned by the High Court after receiving the representation, if
any, made to it by the Central Government to whom notice of the petition for
amalgamation presented by the company will be given pursuant to section 394A.
7. Service of individual notices on members.-Individual notices will have
to be sent by registered post to each and every member for the meeting to be
convened, pursuant to the Court order on an application made to it under
section 391. These notices will also be advertised in two newspapers one in
English and one in regional language at the place in which registered office of
the company is situate. Notice will be issued under the signatures of the
Chairman of the meeting appointed by the High Court.
8. Right of member to rile application for revival of company.-Even though a winding up
order has been made, every member has a right to file an application under
section 391 for the revival of the company. Rajdhani Grains & Jaggery
Exchange Ltd., In re: (1983) 54 Comp Cases 166.
9. Alternative mode of liquidation.-A scheme under the section
cannot be regarded as an alternative mode of liquidation. It is only an
alternative to liquidation. The incidents of a scheme under the section are
different both in principle and in consequence from those of winding up.
Himalaya Bank Ltd. v. J Roshan Lal, (1961) 31 Comp Cases 333 (Punj).
10. Scheme valid between company and ordinary shareholders without
interfering rights of preference shareholders.-Where a scheme was entered
into between the company and its ordinary shareholders only without interfering
with the rights of the preference shareholders, the scheme was held to be valid
even though a meeting of the preference shareholders was not called to
ascertain their views. Mcleod and Co. v. S.K. Ganguly, (1975) 45 Comp Cases
563.
11. Approval of scheme by majority binding.-Once a scheme of compromise
and arrangement under this section is approved by statutory majority it binds
the dissenting minority, the company and also the Liquidator if the company is
in winding up. Navjivan Mill,v Ltd. Kalol, In re: (1972) 42 Comp Cases 265
(Guj).
12. Who can apply.-An application under this sub-section can be
made by a creditor or member even in the case of a company in winding up. M.M.
Sehgal v. Sehgal Papers Lid., (In liquidation) (1986) 60 Comp Cases 5 10
(P&H).
13. Creditor includes contingent creditor.-Creditor in this section is
held to include also a contingent creditor such as the Government, sales tax,
income-tax or other tax liability which has already arisen though the
assessment may not yet have been made. Seksaria Cotton Mills Ltd. v. A.E. Naik,
(1967) 37 Comp Cases 656.
14. Scheme of arrangement between creditors and company not to affect
liabilities of securities.-Any scheme of arrangement between the creditors and
the company will not, however, affect the liability of any sureties for the
company unless the contract of suretyship otherwise provides. Punjab National
Bank Ltd. v. Vikram Cotton Mills Ltd., (1970) 2 Comp LJ 18.
15. Sanction of respective High Courts required.-Where a scheme of
amalgamation is proposed, it is incumbent both on the transferor company and
the transferee company to obtain the sanction of the respective High Courts
having jurisdiction over them and seek proper directions for convening the
meetings of those affected by the proposed amalgamation and obtaining the
approval of the statutory majority at the meetings. Ahmedabad Manufacturing and
Calico Printing Co. Ltd., (1972) 42 Comp Cases 493 (Guj).
16. Common petition not sufficient.-In the case of an
amalgamation, separate petitions by the transferor and the transferee companies
should be filed. Having regard to the particulars required to be considered in
respect of either of them a common petition by one of them alone is not
maintainable. Electro-Carborium Private Ltd. v. Electric Materials
Company Private Ltd., (1979) 49 Comp Cases 825.
17. Consent of creditors must.-The Court cannot sanction a scheme which has
not been approved by the creditors even if the consent of' the creditors has
been withheld mala fide or arbitrarily or even if the Court considers the
scheme to be reasonable and beneficial to the creditors. Sehgal (M.M.) v.
Sehgal Papers Mills Ltd., (1986) 1 Comp LJ 192.
18. Court not to entertain application for amalgamation when permission
granted for take over of management.-Once the Court grants permission under section
18FA of the Industries (Development and Regulation) Act, 1951, for take over of
the management or control, it is precluded from entertaining any application
under this section. Gujarat State Textile Corporation Ltd. v. New Jehangir
Vakil Mills Co. Ltd., (1985) 58 Comp Cases 768 (Guj.)
19. Scheme when to be sanctioned.-Any scheme which is fair and
reasonable and made in good faith will be sanctioned if it could reasonably be
supported by sensible people to be for the benefit to each class of the members
or creditors concerned. Alabama New Orleans Etc Re. Co., (1891) 1 Ch 213.
Scheme will be sanctioned by court when share exchange ratio is accepted by
both the companies and will not say that such ratio is detrimental to their
interest. Alfa Quartz v. Cymex Ltd. [2001] 104 Com Cases 71 (Guj.)
20. Scheme not be sanctioned if object not bona fide.-A scheme will not be
sanctioned even if the shareholders and creditors consent if the object of the
scheme is not bona fide but only to cover up misdeeds of delinquent Directors.
Pioneer Dyeing House Ltd. v. Dr. Shankar Vishnu Marathe, (1967) Comp LJ 16.
Bedrock Ltd. In re, (2000) 101 Com Cases 343 (Bom).
Resolution amending scheme of arrangement
"RESOLVED that all the
unsecured creditors are to be treated as fixed depositors, Linder section 58-A
of the Companies Act, 1956, and the rules thereunder.
RESOLVED FURTHER that the
accrued interest so far due to the unsecured creditors should be treated as a
fresh fixed deposit for a period of three years with interest @ 11% per annum
payable quarterly."
1. Right of creditors/members to move amendment to scheme.-It is open for the creditors
or members to move any amendment to the scheme at the meeting.
2. Resolutions to be voted by taking poll.-All resolutions at this
meeting, including a resolution for amending the scheme, will have to be voted
by way of a poll to ascertain both the number and the value of the creditors/
members voting for and against.
3. Modification to Scheme with majority consent.-The modification to the
scheme has also to be made with the consent of a majority of member present at
the meeting representing three-fourths in value.
Amalgamation of subsidiary
companies with the
holding company
"RESOLVED that subject
to the sanction of the High Court at Bombay of the annexed scheme of
arrangement between the companies mentioned in the Schedule hereunder
(collectively called 'the subsidiaries') and their respective members with or
without such modification as may be directed by the aforesaid Court, approval
be and is hereby accorded to the scheme of arrangement whereby the subsidiaries
will stand absorbed by the Company and their rights, obligations, assets,
liabilities and the entire undertaking will be vested in this Company from the
appointed day if not amended by the said High Court."
1. Expression "Company".-'Company' in section 390 has
specific meaning for the purpose of section 391 and section 393 which means any
company liable to be wound up under this Act. The idea behind the provisions is
to enable companies to have simple dissolution without the process of winding
up.
2. Subsidiaries envisaged in amalgamation may or may not be doing
similar business.-In the scheme of arrangement envisaged hereinabove the subsidiaries may
not be doing similar business but may be in difficulties either because it has
substantially lost its capital or is in such a position that huge capital
outlay is needed to revitalise the same. Before a General Meeting of the
holding company is held, it is essential that the process under the arrangement
is started by passing a Board resolution at a Board Meeting of the Directors of
the holding company.
3. Resolution to be adopted to accompany explanatory statement.-The resolution to be adopted
by the members being special business (but Ordinary Resolution) should be
properly supported by Explanatory Statement to be annexed to the notice of the
meeting pursuant to the provisions of section 173 of the Companies Act, 1956.
4. Subsidiaries amalgamating with holding company.-The subsidiaries, through
authorised Directors, may make necessary arrangement to join in an application
made by the holding company to the High Court seeking sanction of the scheme of
arrangement between the members of the company for dissolution of the
subsidiary without winding up by way of amalgamation with the holding company.
The subsidiaries are to send notices and terms of the arrangement under section
393 of the Companies Act, 1956, to the member/creditors (if any) with a copy of
the scheme of arrangement. In terms of section 391, the meeting of the holding
company is to arrange a shareholders' meeting to be conducted by the Chairman
appointed by the Court.
Applications to be made by holding as well
as subsidiary company
Holding company initiates an
application to be made to the High Court praying sanction of scheme of
arrangement pursuant to section 391 of the Companies Act, 1956. Such
application is also to be made by the subsidiaries and all meetings with either
the members or the creditors of the subsidiaries should be conducted thereafter
by the representatives appointed by the Court.
Specimen scheme of arrangement between the
subsidiaries and their
respective members
1. The issued and subscribed capital of the company is Rs. 10,00,000/- divided into 1,00,000 equity shares of Rs. 10/- each fully called and paid-up.
2. The entire issued and subscribed capital of the company is being held by the A N D Company Limited (hereinafter called "the holding company").
3. All the property, rights
and powers of the company be transferred without further act or deed to the
holding company, and accordingly they shall from the 1st day of August, 2000
(hereinafter called "the transfer date") be transferred to and vested
in the holding company pursuant to section 394(2) of the Companies Act, 1956,
for all the estate and interest of the company therein but subject nevertheless
to all charges now affecting the same.
4. All the liabilities and
debts of' the company shall be transferred without any further act or deed to
the holding company and accordingly, the same shall as from the transfer date
be transferred to the holding company pursuant to section 394(2) of the
Companies Act, 1956, and become the liabilities and debts of the holding
company.
5. All proceedings now pending by or against the company be continued by or against the holding company.
6. The holding company being the beneficial owner of the entire share capital of the company, there will be no issue of shares by the holding company.
7. Subject to the sanction of the High Court at Bombay, the members of the company and the members of' the holding company to tile scheme of arrangement, the company will be amalgamated with the holding company with effect from the 1st day of August, 2000.
8. The company and the holding company shall take necessary steps to amend their respective Memorandum of Association empowering them to amalgamate.
9. The company do, within 30
days after obtaining the certified copy of the order of' High Court at Bombay,
cause a certified copy thereof to be delivered to the Registrar of Companies
for registration and on such certified copy being so delivered, the company
shall forthwith be dissolved without winding up and the Registrar of Companies
shall place all documents relating to the company and registered with it, on
the file kept by him in relation to the holding company, and the files relating
to the company and its holding company shall be consolidated accordingly.
10. The company and the
holding company may assent on behalf of all concerned to any modification to
the scheme or to any condition which the Court may think fit to approve.
None of the Directors of the company is a Director of the holding company or the other subsidiary company.
(Another Format)
Ss. 391/394-Approval of scheme of amalgamation-Special
Resolution
"RESOLVED that the scheme for the amalgamation of the Company with M/s. AND & Company Limited, in terms of the scheme of arrangement (a copy of which was placed before the meeting and initialed by the Chairman thereof for the purpose of identification) be and is hereby approved and that the Directors of the company be authorised to do all Such acts, deeds and things as are required for giving effect to the said scheme of arrangement and to assent to Such modifications and conditions, if any, as may be imposed by the High Court at Bombay in sanctioning-, the said scheme of arrangement or as may be suggested by M/s. AND & Company Limited and approved by the Court."
1. Approval of majority shareholders for amalgamation of subsidiary
with holding company.-Where the amalgamation is of the subsidiary with the
holding company, the resolution for the amalgamation is to be passed by the
required majority of the subsidiary company's shareholders consisting mainly of
the representatives of the holding company and the nominees of such company who
will form the quorum.
2. Procedure to be adopted in case of amalgamation of two or more
companies without putting any company in liquidation.-In case it is desired to
carry out a scheme of amalgamation of two or more limited companies without
putting any company in liquidation:-
(A) As far as the transferee
company is concerned:
(i) Whether the Memorandum
of Association contains the power to amalgamate should be checked up. If not,
the procedure for altering the same with Company Law Board's confirmation
should be followed.
(ii) A draft scheme of
amalgamation should be prepared and considered in the Board Meeting.
(iii) Application should be
made to the Court for directions to convene the General Meeting by way of
Judge's summons supported by an affidavit. The summons should be in Form No. 33
and the affidavit in Form No. 34 of the Companies (Court) Rules, 1959. A copy
of the proposed scheme of amalgamation must be attached to the affidavit.
(iv) The summons
should he accompanied by the following documents:
(a) A true copy of the
Memorandum and the Articles of association of each of the two companies;
(b) A true copy of the
latest balance-sheet and the profit and loss account oil' the company.
(v) The Court
will then give the directions in respect of matters set out in
Rule 69 with regard to the
meeting including fixation of time, place and quorum of the meeting,
appointment of Chairman, etc.
(vi) Notices have to be sent
for the General Meeting to every member with a statement setting forth the
terms of the compromise or arrangement and explaining its effect; and, in
particular, stating any material interests of the Directors, Managing Director,
or Manager of the company, whether in their capacity as such or as members or
creditors of the company or otherwise, and the effect on those interests, of
the amalgamation, if and in so far as, it is different from the effect on the
like interests of' other persons (Section 393(l)(a)). The notice has to be
given in Form No. 6 and sent not less than twenty-one clear days before
the date fixed for the meeting.
(vii) Where a notice is
given by advertisement, there should be included either a statement as
aforesaid or a notification of the place at which and the manner in which
members who are entitled to attend tile meeting may obtain copies of such a
statement (Section 393(i)(b)). This advertisement must be in Form No. 38 3 '
and it must be given not less than twenty-one clear days before the date
fixed for the meeting.
(viii) Where the
amalgamation affects the rights of debenture-holders of the company, the
said statement must give the like information and explanation as respects tile
trustees of any deed for securing the issue of the debentures (Section 393(2)).
(ix) Where a notice given by
advertisement includes the intimation that copies of statement setting forth
the terms of compromise or arrangement proposed and explaining its effect can
be obtained by creditors or members entitled to attend the meeting, every
creditor or member so entitled must, on making an application in the manner
indicated by the notice, be furnished by the company, free of charge, with a
copy of the statement (Section 393(3)). It must be furnished within twenty-four
hours of the requisition being made 36 the Chairman appointed for the meeting
of the company or other person directed to issue the advertisement and the
notices of the meeting should file an affidavit not less than seven days before
the date of the meeting. This affidavit will show that the directions regarding
the issue of notices and the advertisement have been duly complied with.
(x) A General Meeting should
be held and the following resolution passed:
(a) A resolution approving
the draft scheme of amalgamation subject to the confirmation of the High Court
to be passed by a majority in number representing three-fourths in value
of members as required under section 391 and authorising the Directors to
implement the scheme.
(b) A Special Resolution or
an Ordinary Resolution followed by the approval of' tile Central Government
under section 81 authorising Directors to allot further shares without offering
them first to the company's existing equity shareholders and also authorising
the Directors to dispose of at their discretion those shares which may not be
taken up by the dissident shareholders of the transferor company.
(c) Where the unissued share
capital is not sufficient, a resolution to increase authorised share capital of
the company in accordance with the provisions of the Articles of Association in
this regard.
(xi) All the decisions of
the meeting must be ascertained only by taking a poll."
(xii) The resolutions
mentioned in items (7)(i) and (ii) above, and if the resolution mentioned in
item (7)(iii) is a Special Resolution then, the same, along with Explanatory
Statement should be filed with the Registrar within thirty days of their
passing in Form No. 23 (Section 192). The provisions of Rule 78 of the
Companies (Court) Rules, 1959 should also be noted in this connection.
(xiii) The Chairman of the
meeting has to report the results of the meeting to the Court in Form No 39
within the time fixed by tile Judge or within seven days after the conclusion
of the meeting.
(xiv) The High Court should
be moved by presenting a petition in Form No. 4 within seven days of the filing
of the report by the Chairman. The provisions of sections 391 to 395 should be
noted in this connection.
(xv) On receipt of the Court
order, a certified copy thereof should be filed with the Registrar within
thirty days after the making of the order (Section 394(3)).
(xvi) A copy of every such
order should be annexed to every copy of the memorandum of the company issued
after the certified copy of the order has been filed as aforesaid, or in the
case of a company not having a memorandum, to every copy so issued of the
instrument constituting or defining the constitution of the company (Section
391(4)). If default is made in complying with this requirement, the company and
every officer of the company who is in default will be punishable with fine of
Rs. 100/- for each copy in respect of which default is made.
(xvii) Proceed on effecting
the scheme of amalgamation as pet- the scheme approved and directions
given by the High Court by issuing suitable notices to the shareholders and
persons concerned and allotting shares and taking over the business as per the
scheme.
(B) As far as the transferor
company is concerned
(i) Whether the memorandum
of association contains the power to amalgamate should be checked up. If not,
first carry out the proceedings to alter the same with the confirmation of the
Company Law Board.
(ii) Draft scheme of
amalgamation should be approved in the Board meeting.
(iii)
Application should be made to the court, as stated in (A)(iii) above.
(iv) Notices
should be sent in the same manner as mentioned in (A)(vi).
(v) Resolution approving the
draft scheme of amalgamation, subject to the confirmation of the High Court,
should be passed at a general meeting of the company by a majority in number
representing three-fourths in value of members as required under section
391 and authorising the directors to implement the scheme.
(vi) The High Court should
then be moved.
(vii) The High Court has to
be supplied with all the material facts regarding the scheme (Proviso to
Section 391(2)). Further, the High Court will not sanction the scheme unless it
has received satisfactory report from the Company Law Board or the Registrar
(Proviso to Section 394(l)).
(viii) On receipt of the
court order, a certified copy thereof should be filed with the Registrar within
thirty days after the making of the order (Section 394(3)).
(ix) A copy of every such
order must be annexed to every copy of the memorandum of the company issued
after the certified copy of the order has been filed, as aforesaid, or in the
case of a company not having a memorandum, to every copy so issued of the
instrument constituting or defining the constitution of the company (Section
391(4)).
(x) Scheme of amalgamation
should then proceed as per the scheme approved and directions given by the High
Court issuing suitable notices to the shareholders and persons concerned.
Sanctioning of the scheme of amalgamation by the High Court without
simultaneously making any order for the dissolution of the transferor company
without winding up is permissible provided it does not render meaning less the
provisions contained in the proviso to section 394(l). (Circular No.
35/75(51/l/72CL.III) dt. 6-1- 1975)
(xi) If the transferor and
the transferee companies are situated in two different States, then for
approving the scheme of amalgamation each company should move the respective
High Courts for getting the direction. But, if they are situated in the same
State, then one company may move the court provided the other company is made a
party to the petition because the scheme of amalgamation as held by the Madras
High Court WA. Beardsell & Co. v. Mettur Industries Ltd., (1966) 36 Comp
Cases 197 involves an identity of interest between the transferor company and
the transferee company.
Scheme of Compromise and Arrangement for
Spinning off two divisions
"RESOLVED that pursuant
sections 391 and 394 and subject to the approval of the High Court consent of
the shareholders of the Company be and is hereby given to the scheme of
arrangement seeking to transfer two divisions of the company namely ABC
division and XYZ division to and vested in Wadhwa Financial Services Ltd. and Wadhwa
Trading Ltd. respectively in pursuance of a scheme of spin off copy of both the
schemes being placed before meeting and intialled by the Chairman for the
purpose of identification.
RESOLVED FURTHER that the
Board of Directors of the Company be and is hereby authorised to do all such
acts and deeds as are required to give effect to the said scheme of arrangement
and to carry out such alterations in said scheme and assent to such conditions
as may be imposed by the High Court while sanctioning the said scheme.
1. Commercial merits of the scheme.-While considering a scheme
of arrangement, the Court will not enter into commercial merits or demerits of
the scheme before it and will not go into the commercial wisdom of either the
Board of Directors or of the shareholders the said scheme being passed
overwhelming majority of shareholders. Mather & Platt (India) Ltd. In re,
(2002) 39 SCL 58 (Bom).
2. Distinction between scheme of arrangement and scheme of
amalgamation.-In a scheme of amalgamation tile transferor company is merged with the
transferee company and as a result of this the transferor company as an
amalgamating entity ceases to have any existence. In such a scheme of'
amalgamation 'Shares of' transferee company are offered to the shareholders of'
the transferor company In lieu of' the shares they hold in that company. But in
a scheme of arrangement involving spin off, two divisions of' tile transferor
company were sought to be transferred to the two transferee companies
respectively and as consideration for such transfer, the shareholders of' the
transferor company are allotted certain shares of the two transferee companies.
The membership of the shareholders of' the transferor company is not terminated
and do not come to an end as in a scheme of amalgamation. The shareholders of
the transf7cror company continue to be shareholders of that company but as a
result of the transfer of a portion of the assets of tile transferor company to
the transferee companies certain shares of the transferee companies are
allotted in addition to their existing shareholding.
Scheme of compromise/arrangement with members/creditors
"RESOLVED that consent
of the shareholders be and is hereby given to the State of Haryana entering
into agreements with the shareholders and creditors of the Company as may be
necessary and desirable with a view to giving effect to the proposal contained
in a scheme of rehabilitation and that necessary application be made to the
High Court of Delhi pursuant to section 391 of the Companies Act, 1956 for
their approval to the said scheme.
RESOLVED FURTHER that the
Board of Directors of the Company be and is hereby authorised to do all such
acts and things as may be necessary to give effect to this Resolution."
1. Application to High Court.-Application is to be made to the High Court
in the form prescribed under tile Companies (Court) Rules, 1959.
2. Details of scheme to be embodied in either resolution or Explanatory
Statement.-Details of' the scheme should be given either in the body of the
Resolution or in the Explanatory Statement annexed thereto pursuant to section
173(l) of the Act.
3. Creditor includes contingent creditor.-A creditor under section 391
includes a contingent creditor, for instance, liability to pay sales tax,
income-tax where assessment is not yet complete.
4. Scheme to be beneficial to shareholders/creditors.-The scheme should be
beneficial to the shareholders and creditors and the High Court should be
satisfied that the scheme is bona fide. Normally if 3/4th of the creditors
(value-wise) and shareholders approve the scheme, the High Court will
sanction it. However, if it appears that the scheme is not bona fide, the
scheme will not be sanctioned.
5. Ordinary Meetings of shareholder/creditor.-After the application is
made, the High Court will have meeting of the shareholders and creditors
convened and held under its own auspices to be chaired by a person appointed by
it and will approve the scheme after receiving a report from the Chairman of
the Meeting.
Resolution approving Scheme with Amendment
"RESOLVED that the
compromise or arrangement proposed by X and Company and the creditors placed
before the meeting and duty initialled by the Chairman for identification
thereof and as amended at the meeting, be and is hereby approved."
1. Chairman to file report within seven days of passing of resolution.-Within 7 days of the passing
of this resolution, the Chairman of the meeting will have to file a report in
the High Court about the proceedings of the meeting.
2. Petition to High Court.-Within 7 days thereafter, the company will
have to file a petition in the High Court for confirmation of the scheme.
3. Filing with Registrar.-Form No. 23 along with the Explanatory Statement
will have to be filed with the Registrar of Companies within 30 days of the
passing of the resolution on payment of requisite filing fee. Non-filing
will attract penalty by way of fine of up to Rs. 100/-.
Increase of Capital for effecting Scheme of Amalgamation
"RESOLVED that the
authorised capital of the Company be and is hereby increased from Rs. _________ consisting of _________ equity
shares of Rs.10/- each to Rs.
_________ consisting
of _________ equity shares of Rs. 10/-
each to enable the allotment of shares in the company to the share-holders
of M/s. X and Company Ltd., pursuant to a scheme of amalgamation between the
Company and the said X and Company Ltd."
1. Resolution required when authorised capital not sufficient to meet
obligation. -This
resolution would be necessary where the scheme of amalgamation contemplates the
allotment of shares to the members of the other company, and the authorised
capital Is insufficient to meet the obligation.
2. Filing with Registrar.-Form No. 23 along with the Explanatory Statement
will have to be filed within 30 days with the Registrar of Companies on payment
of requisite filing fee. Non-filing will attract penalty by way of fine
of upto Rs. 100/-
3. Provisions
of section 94 to be complied.-The provisions of section 94 of the Act will also
have to be complied with.
Amendment to the Scheme of Amalgamation
"RESOLVED that the
scheme of Amalgamation approved at the Extraordinary General Meeting of the
Company held on _________ 2002 by the shareholders be
and is hereby amended by insertion of the following additional clause 13A
after the clause 13 mentioned in the said scheme.
" 13A __________________
RESOLVED FURTHER that the
Board of Directors of the Company be and is hereby authorised to agree to such
alteration in the said insertion as may be required while approving the
amendment and place the scheme of amalgamation as amended by this to the Court
for its sanction.
1. Inspection of copy of the scheme.-Keep copies of the scheme of
amalgamation at the re6stered office of the company for inspection during
working hours of the company.
2.
Filing with Registrar.-Same as Practice Notes No. 2 given under
Resolution 11B.
Authorising Board to compromise with creditors
"RESOLVED that the
Board of Directors of the Company be and is hereby authorised to form a
committee in co-operation with the concerned State and the Central
Government authorities (not exceeding six members in such committee) to enter
into negotiation and prepare a compromise scheme for the approval of the
members and the creditors and to give them such assurance, undertaking or guarantee
on behalf of the Company which such committee considers beneficial to the
interest of the company."
1. Meeting ordered by the court.-Where a compromise or arrangement is proposed between a company and its creditors or any class of them, the court orders a meeting to be called, held and conducted in such manner as the court directs. This order of the court is given on the application of either the company or the creditors.
2. The Companies (Court) Rules, 1959.-Rules 67 to 87 should be followed
for any compromise or arrangement to be made under sections 391 to 394 of the
Act.
Resolution to be passed in creditors' meeting
S. 391-Comproinise with creditors-Creditors'
Meeting Resolution (3/4th in value)-Ordinary Resolution
"RESOLVED that approval
be and is hereby given to the scheme of arrangement prepared by the committee
appointed by the general body of shareholders in this behalf and confirmation
be accorded to the terms of compromise contained in the scheme a copy of which
has been tabled at this meeting and authenticated by the Chairman subject,
however, to such additions and alterations as may be directed by the Hon'ble
High Court at Bombay in this regard."
1. Expression arrangement and compromise.-'Arrangement' and 'compromise',
though analogous expressions, vary in certain respects. Compromise is an
expression which implies the existence of a dispute which it seeks to settle,
but arrangement indicates not only settlement of dispute but would also cover
reorganisation of share capital not excluding interference with the rights and
liabilities of the various classes of shareholders. Hindustan Commercial Bank
Ltd. v. General Electric Corporation, (1960) 64 CWN 672: AIR 1960 Cal. 637:
(1960) 30 Com Cases 367.
2. Compromise with creditors to be separately arranged and not to be
mixed up with meetings of members.-Compromise with the creditors is separately
arranged and not mixed up with the meetings of members and the application to
the High Court. The definition contained in provisions of section 390 makes it
clear that all arrangements or compromises are designed to revive the company
which is otherwise liable to be wound up under the Act. Procedure for a
compromise follows the same pattern as arrangement with the members, namely-
(i) a special resolution by
the members of the company;
(ii) application of the
company to the High Court giving full details of the scheme;
(iii) the concerned High
Court, by an order, selects a Chairman for conducting separate meetings of the
creditors and the members under section 391(l) of the Companies Act, 1956.
3. Creditors include contingent creditors.-Creditors under this section
include contingent creditors to whom liability may arise say, after assessment
under the Sales Tax Act or the Income-tax Act. Seksaria Cotton Mills Ltd.
v. A. E. Naik, AIR 1967 Bom 341: (1967) 37 Comp Cases 656.
Scheme of Arrangement and Reconstruction formulated by
Creditors
RESOLVED that pursuant to section 391 of the Companies Act, 1956 and subject to the sanction of the Court, approval be and is hereby given to the scheme of arrangement and reconstruction of the company debts floated by the unsecured creditors, working capital lenders and secured creditors of the company, a copy of which has been tabled at this meeting and initialled by the Chairman for the purpose of identification.
RESOLVED FURTHER that the
Board of Directors of the company be and is hereby authorised to make Such
alterations or additions in the said scheme as the Court may order to do and to
give effect to the said scheme subject to such terms and conditions as the
Court may direct while sanctioning the said scheme.
1. Relief undertaking.-The Company Court has Jurisdiction to consider the
petition filed under section 391 by a company which is a relief undertaking
under the provisions of the Bombay Relief Undertakings (Special Provisions)
Act, 1958.
2. Past conduct not relevant.-Past conduct of the company is not relevant
for the purpose of the approval of' the scheme of arrangement and
reconstruction. In the case of the scheme of arrangement the company concerned
would very much remain a legal entity and would continue to function. Past
transactions would be relevant or required to be seen in case of a scheme of
amalgamation of the company where the Transferor Company merges into the
transferee company.
Reconstruction of a company
"RESOLVED that pursuant
to a scheme of reconstruction, M/s. A.B. and Co. Ltd., be wound up voluntarily
and Mr. X be appointed as the liquidator for the purpose of such winding up at
a remuneration to be fixed by the Board of Directors of the Company.
RESOLVED FURTHER that the
said Liquidator be and is hereby empowered to incorporate a new company with a
Memorandum and Articles of Association as per draft placed before the meeting
duly initialled by the Chairman for purposes of identification.
RESOLVED FURTHER that
subject to the confirmation of Court, consent of the company be and is hereby
accorded to a scheme of reconstruction between the company and the new company
a copy of which is placed before the meeting duly initialled by the Chairman
for purposes of identification."
1. Procedure for reconstruction of company.-Where it is proposed to
reconstruct a company, the usual procedure is to wind up the existing company
and to form a new company with the Board of Directors of the existing company
being the subscribers to the new Company's memorandum or having a majority of
the shareholders of the existing company, and having for its object, the taking
over of the undertaking of the existing company.
Reconstruction of a company
"RESOLVED that subject
to confirmation of Court, consent of the Company be and is hereby accorded to
the scheme of reconstruction of the Company placed before the meeting duly
initialled by the Chairman for purposes of identification.
RESOLVED FURTHER that on the
scheme being confirmed, the Directors of the Company be and are hereby
authorised to form a new company with the object of taking over and running the
business of the company."
1. Procedure for reconstruction similar as in case of scheme of
reconstruction. -The procedure to be followed is the same as in a scheme of arrangement
or amalgamation.
2. Scheme of reconstruction when propounded.-A scheme of reconstruction
is generally propounded by a company on the verge of liquidation with a view to
prevent the company from going into liquidation.
3. Assets of company taken over by another company in reconstruction.-In a reconstruction, the
assets of the company are usually taken over by another company having
substantially the same shareholders or promoted by the same Directors.
Scheme or contract of transfer
of shares
RESOLVED that the pursuant
to section 395 of the Companies Act, 1956 the scheme involving the transfer of
shares of the company to the ABC Co. Ltd., a copy of which is placed before
this meeting and initialled by the Chairman for purpose of identification be
and is approved.
RESOLVED FURTHER that the
Board of Directors of the Company be and is hereby authorised to every action
that may be needed for implementing the said scheme and take every step in connection
therewith or incidental thereto.
1. Approved by shareholders nine tenths in value.-Approval of the shareholders
of the transferor company should be obtained within 4 months after the making
of the offer of' acquisition of shares by the transferee company. The scheme
should be approved by the holders of' not less than nine tenths in value of'
the shares whose transfer is involved other than shares already held at the
date of' the offer by or by a nominee for the transferee company or its
subsidiary.
2. Authorisation in the Memorandum of Association.-The transferor company
should contain the power to transfer shares under this section in the objects
clause of its memorandum of association
Winding up by Court
"WHEREAS the Company
has been incurring continued losses for the past several years;
AND WHEREAS the assets of
the company are insufficient to meet the liabilities;
AND WHEREAS it is no longer
possible to run the company except at a loss;
NOW THEREFORE IT IS RESOLVED
that the Company be wound Lip by the Hon'ble High Court at Bombay, which will
become effective from the date the Court declares the Company to be wound up by
such Court and that the Board of Directors be and is hereby authorised to make
necessary applications therefor and take action for the winding up of the
Company by the said Court."
1. Tests for approaching Court for winding up.-Tests in such cases for
approaching Court for winding up by the Court is that the company is
commercially insolvent, that is to say, that the assets are such and its
existing liabilities are such as to make it reasonably certain that the Court
would feel satisfied that the existing and probable assets would be insufficient
to meet the existing liability.
2. When Special Resolution not required.-If the other conditions for
the winding up as provided in section 433 are present, it is not necessary for
the company to pass the Special Resolution under section 433(a). State of Madras
v. Madras Electric Tramways Ltd., (1955) 2 MLJ 640: AIR 1957 Mad 169.
3. Who can present winding up petition.-A petition for winding up
can be made by any of the persons and in the manner as mentioned in section
439. It shall be in Form No. 45, 46 or 47 of the Companies (Court) Rules. [Rule
95 of the Companies (Court) Rules 1959.] Trade Unions cannot be held entitled
to maintain winding up petitions against the employer companies because they
have efficacious and legitimate remedies provided by the Central and State
enactments for recovery of their dues. Mumbai Labour Union v. Indo French Time
Industries Ltd., (2002) 110 Com Cases 408 (Bom).
4. Petition when presented by company.-If the petition is presented
by the company every contributory or creditor of the company should be
furnished with a copy of the petition within twenty-four hours of his
requiring the same on payment of the prescribed charges. [Rule 98 of the
Companies (Court) Rules 1959.
5. Advertisement of petition.-See that the petition is advertised in Form
No. 48 of the Companies (Court) Rules, subject to any directions of the Court,
not less than fourteen days before the date fixed for hearing in one issue of
official gazette of the State or the Union Territory concerned and in one issue
each of a daily newspaper in English language and in the regional language
circulated in the state or the union territory concerned. [Rule 99 of the
Companies (Court) Rules 1959.]
6. Application to Court must contain sufficient grounds for appointment
of provisional liquidator.-Application should be made to the Court with an
affidavit containing sufficient grounds for the appointment of the provisional
Liquidator for obtaining the order of the Court appointing the Official
Liquidator as the provisional Liquidator. [Rule 106 of the Companies (Court)
Rules 1959.]
7. Advertisement of winding up order.-On receipt of the winding up
order from the Court, it should be advertised in Form No. 53 of the Companies
(Court) Rules within fourteen days of the date of making the order in one issue
each of a newspaper in English language and in the regional language
circulating in the state or the Union Territory concerned. A copy of this order
must also be served upon such person, if any, and in such manner as the Judge may
direct, [Rule 113 of the Companies (Court) Rules 1959.]
8. Filing of certified copy with Registrar.-There should be filed with
the Registrar a certified copy of the order within thirty days from the date of
making the order (Section 445).
9. Stamp Duty.-Calcutta High Court in Gemin Silk and Gemin Overseas
in an application under section 394 has held that stamp duty should be imposed
in an order of the Court approving the scheme and no order with stamp duty
affixed on it should be allowed filed with the Registrar of Companies.
10. Submission of Statement of Affairs.-A statement of the affairs
of the company in Form No. 57 of the Companies (Court) Rules 1959 must be
submitted to the Official Liquidator within twenty-one days from the date
of appointment of the Official Liquidator or from the date of the winding up
order or within such extended time not exceeding three months. Such a statement
must be submitted in duplicate, one copy of which shall be verified by an
affidavit in Form No. 58 of the Companies (Court) Rules. [Section 454 and Rule
127 of the Companies (Court) Rules 1959.]
11. Procedure for carrying out winding up proceedings.-The winding up proceedings
will be carried out in accordance with the provisions of sections 426 to 483
and 528 to 559 and as per the relevant rules of the Companies (Court) Rules
1959.
12. Winding up of company when concluded.-The winding up of a company
by order of the Court shall be deemed to be concluded at the date on which the
order dissolving the company has been reported by the Liquidator to the
Registrar of Companies. [Rule 284(a) of the Companies (Court) Rules 1959.]
13. Discretion of the Court.-The issue of winding up of a company under
section 433 is a matter of discretion in view of the fact that section 433
postulates that a company "may" be wound up for the reasons indicated
in various clauses of section 433. This discretion must be exercised on some
sound footing. The Court must put the claims of the rival parties in a balance
and weigh them while exercising its Judicial discretion. The weiahtier claim
must be accepted. Canara Bank v. Arihant Industries Ltd., (2002) 110 Com Cases
70 (P&H).
Winding up of the company by the Court
"RESOLVED that consent
of the company be and is hereby accorded to the Board of Directors of the
company to present a petition to the Hon'ble High Court of Delhi for winding up
the company by the Court from such date as it may determine."
1. Procedure for presenting petition.-For Rules of Procedure for
presenting a petition to the Court, procedure given in the Companies (Court)
Rules, 1959, has to be followed.
2. When resolution not necessary.-In case the company is to be
wound up by the Court on any of the conditions specified in clauses (b) to (f)
of section 433 of the Act, such a resolution is not necessary.
3. Filing with Registrar.-File a copy of the resolution within thirty days in
Form No. 23 with the Registrar of Companies concerned by paying the prescribed
fee. Non-filing will attract penalty by way of fine of up to Rs. 100/-.
Winding up by the Court of a company
"RESOLVED that pursuant to section 433(a) of the Companies Act, 1956, the Company be wound up by the Court.
RESOLVED FURTHER that the Board of Directors of the Company be and is hereby authorised to do every thing that is necessary and required inconnection with such winding up and incidental and ancillary thereto.
Same as given under Resolution 1122.
Power of Liquidator to sell property of the company pursuant
to an existing agreement
"RESOLVED that the
property of the Company situated at _________
be sold to M/s. X
and Company Limited in terms of an agreement dated _________ entered
into between the Company and the said M/s. X and Company Limited.
RESOLVED FURTHER that the
Official Liquidator be and is hereby empowered to sign and execute deeds of
conveyance and all such other documents and to deliver the title deeds in
respect of the property to M/s. X and Company Limited on receipt of the sale
consideration thereof."
1. Power of liquidator to sell property.-Section 457 empowers the
Liquidator to sell the company's property by public auction or by private
contract.
2. Liquidator to call meeting of creditors and shareholders before
selling property.-However, it would be preferable for the Liquidator to summon a meeting
of the creditors and the share holders to ascertain their wishes.
Voluntary winding up and appointment of Liquidator
"RESOLVED that in terms
of the provisions of section 484(l)(b) of the Companies Act, 1956 M/s XYZ
Limited be and is hereby wound up voluntarily.
RESOLVED FURTHER that in
terms of the provisions of section 490 of the Companies Act, 1956 Shri SKM,
Secretary in whole-time practice be and is hereby appointed as the
Liquidator of the Company at a remuneration of Rs.20,000/- (Rupees twenty
thousand only), exclusive of other liquidation expenses at actuals to finalise
the affairs of the Company."
1. Company may be wound up voluntarily by passing Special Resolution.-It will be noted that under
section 484(l)(b) however prosperous and solvent a company may be, if the
members wish the company to be wound up, they can do so by passing a special
resolution to that effect and no reasons need be given No articles of the
Company can prevent the exercise of this statutory right.
2. Special Resolution passed
unanimously by giving shorter notice valid.-Where the required special
resolution was passed at a meeting convened by giving a shorter notice than
that required by the Act, but all the members of the company unanimously agreed
thereto, the resolution being intra vires the company, was held valid. (In re
Bailey Hay, & Co. Ltd., (1972) 42 Corn Cases 442).
3. Scheme can be drawn by
shareholders for paying off debts etc.-The shareholders can drawn a scheme for
distributing the company's assets and business among themselves, undertaking in
turn to pay off the company's debts. Pamarti Venkataswamy v. Kondandarama Bus
Transport Ltd., (1958) 28 Com Cases 50.
4. Company cannot pay
gratuity to directors etc. after winding up.-A Company should not, after
the commencement of the winding up, give gratuities to directors or servants
and if they are voted, the liquidator should refuse to pay them. (Hutton v.
West Cork Rl v., (1883) 23 Ch D 654).
5. Winding up does not put
an end to corporate existence of company.-A voluntary winding up does
not put ail end to the corporate existence of the company. The company exists
until it is dissolved. The powers of the directors continue to the extent to
which they are allowed by the liquidator. (Rangai Goundan (M.K.) Re, (1942) 12
Comp Cases 198).
6. Winding up does not
operate as stay of existing proceedings or institution of new proceedings.-A voluntary winding up does
not operate as a stay of any existing proceedings or prevent the institution of
new proceedings. The liquidator is treated as a person in the position of an
agent for the company, performing his duties in accordance with the provisions
of the Act. (Knowles v. Scott, (189 1) 1 Ch 717).
7. Passing of resolution for
voluntary winding up does not operate as notice of discharge of employees.-The passing of a resolution
for voluntary winding up does not operate as notice of di8charge of the
employees of the company, if the business is continued by the liquidator or the
liquidation is only with a view to reconstruction. (Reigate v. Union
Manufacturing Co. (Ramsbottom) Ltd., (1918) 1 KB 593).
8. During pendency of
voluntary winding up petition can be presented for winding up by Court.-It may be noted that even
during pendency of a voluntary winding up a petition may be presented under
section 440 for winding up by the court by any person authorised to do so by
section 439 or by the Official Liquidator.
9. Remuneration once fixed
cannot be increased.-The remuneration cannot be increased in any circumstances
whatever. Even the court does not have power to increase it. (Rajaranian (V.),
Liquidator, Globe United Engg. & Foundry Co. Ltd. v. Registrar of Cos., (1974)
44 Comp Cases 330 (Del)).
10. Court's power to fix
remuneration.-The remuneration of the voluntary liquidator has to be fixed at the
meeting by the contributories or at a subsequent meeting. If that is not done,
an application can be made to the court for fixing such remuneration as the
court thinks just. (Amalgamated Syndicate Ltd. Re, (1901) 2 Ch 181).
"RESOLVED that Mr. ABC
of the firm M/s. ABC and Company, solicitors, the Liquidator appointed by the
company be and is hereby empowered to exercise the following powers:
(a) To institute or defend
any suit, prosecution, or other legal proceeding, civil or criminal, in the
name and on behalf of the company;
(b) To carry on the business
of the company so far as may be necessary for the beneficial winding up of the
company;
(c) To sell the immovable
and movable property and actionable claims of the company by public auction or
private contract, with power to transfer the whole thereof to any person or
body corporate, or to sell the same in parcels;
(d) To raise on
tile Security of the assets of the company any money requisite;
(e) To do all such other
things as may be necessary for winding up the affairs of the company and
distributing its assets."
1. Liquidator not an officer of court.-A liquidator in a voluntary winding up cannot properly be called an officer of' the Court (TH. Knitwear (Wholesale) Ltd. Re, (1989) 3 Comp LJ 31).
2. Powers of directors
should not subject liquidator to supervision of directors. -The powers of the directors,
etc., Should not, however, be such as to subject the liquidator to the
supervision of the directors in respect of his statutory duties under the Act.
(Shamdashani v. Tata Industrial Batik, ILR 52 Born 571).
Members' Voluntary Winding up (Ss. 484- 486)
A Voluntary winding up does not put an end to the corporate existence of the company. The company exists until it is dissolved. The Liquidator is treated as a person in the position of an agent for the company performing his duties in accordance with the provisions of the Act. Knowles v. Scott, (189 1) 1 Ch 717; Pulsford v. Devenish, (1903) 3 Ch 625.
"RESOLVED that the
Company be and is hereby Wound up voluntarily as a members' voluntary winding
Lip.
RESOLVED FURTHER that Shri
OPM be and is hereby appointed as the liquidator for the purpose of winding Lip
of the Company.
RESOLVED FURTHER that Shri
OPM, the liquidator shall be paid a remuneration of Rs. 70,000/- for the
winding up of the company.
RESOLVED FURTHER Shri OPM,
the liquidator be and is hereby authorised to exercise all the powers mentioned
in clauses (i) to (iv) of sub-section (2) of section 457 of the Companies
Act, 1956."
1. Ordinary Resolution-When period fixed for
duration of Company expired or event occurred.-As per clause (a), where a
company was formed for a fixed period or tile Articles had provided that the
company was to be dissolved on the happening of certain event or events, the
Company may be wound-up by the passing of a simple resolution by bare
majority at a general meeting, if the period fixed had expired or the event or
events had happened.
2. Special Resolution.-As regards clause (b) of
section 284 of the Act, however, the passing, of a special resolution as
defined in section 189(2) is necessary.
3. Filing.-File Form No. 23 along with
Special Resolution within thirty days of' Passing thereof with tile Register of
Companies concerned.
4. Meeting convened by
giving shorter notice-Resolution passed unanimously valid even though
intra vires company.-Where tile required special resolution was passed at a meeting convened
by giving a shorter notice than that required by the Act, but all the members
of' the company unanimously agreed thereto, the resolution being intra vires
the company, was held valid. In re Bailey Hay & Co. Ltd., (1972) 42 Comp
Cases 442: (1971) 3 All ER 693 (Ch D).
5. Effect of winding-up.-A voluntary winding-up
does not put an end to tile corporate existence of' tile company. The company
exists until it is dissolved. The powers of the directors continue to the
extent to which they are allowed by tile liquidator. A voluntary winding-
up does not operate as I stay of' any existing proceedings or prevent the
Institution of' new proceeding. The liquidator is treated as a person in tile
position of an agent for the company, performing his duties In accordance with
the provisions of' the Act; Knowles v. Scott, (1891) 1 Ch 717; Pulsford v.
Devenish, (1903) 2 Ch 625.
6. Resolution for voluntary
winding-up does not operate as notice of discharge of employees.-The passing of' a resolution
for voluntary winding-up does not operate as notice of discharge of the
employees of' the company, ]if the business is continued by the liquidator or
the liquidation is only with a view to reconstruction. (AIR 1928 Sind 137;
Reigate v. Union Manufacturing Co. (Ramsbottom) Ltd., (1918) 1 KB 593).
7. During pendency of
voluntary winding petition for winding by Court can be presented.-While the pendency of' a
voluntary winding-up is no bar to an application for winding-up by
or under the supervision of the Court (Section 521 now repealed and S. 440), it
has been held that the passing of a resolution for voluntary winding-up,
while a petition for compulsory winding LIP Is pending and with knowledge of
the latter, would be a contempt of court the persons responsible there for
being liable for the contempt. (In re Parsonage (Septimus) & Co., (1901) 2
Ch 424).
It may be noted that even during pendency of a voluntary winding-up, a petition may be presented under Section 440 for winding up by the court by any person authorised to do so by Section 439 or by the official liquidator.
8. Publication of resolution
to wind-up voluntarily.-Within fourteen days of the passing of resolution
for voluntary winding up, the company shall give notice of the resolution by
advertisement in the Official Gazette and also in the newspaper circulating in
the District where the registered office of the Company is situate. (S. 485).
9. Penalty.-If default is made in giving
notice by publication, then the Company and every officer of the Company shall
be punishable with fine up to Rs. 500/- for every day during which the
default continues.
10. Commencement of
voluntary winding up.-A Voluntary winding up shall be deemed to commence
at the time when resolution for voluntary winding up is passed.
11. Effect of voluntary
winding up.-The company ceases to carry on business except so far as may be
required for the beneficial winding up of such business.
Members' voluntary winding
up
"RESOLVED that pursuant
to the provisions of section 484(l)(b), consent of the shareholders be and is
hereby given for winding up the Company.
RESOLVED FURTHER that Shri
XYZ be and is hereby appointed as Liquidator of the Company for tile purpose of
winding LIP on a remuneration of Rs. 20,000/- Plus Out-of-pocket
expenses at actuals.
RESOLVED FURTHER that Shri
XYZ, the Liquidator be and is hereby empowered to exercise all powers as
provided in sub- clauses (i) to (iv) Of sub-section (2) of section
457 of the Companies Act, 1956."
1. Declaration of solvency.-At a meeting of the Board
of' Directors, the Directors or where there are more than two Directors, the
majority of' them should make a declaration of solvency in Form No. 149
prescribed under the Companies (Court) Rules, 1959.
2. Declaration to accompany
report of Auditors on balance-sheet and profit and loss Account.-The declaration should be
accompanied by a report of' the Auditors on the balance-sheet and profit
and loss account/income and expenditure account of the company up to the date
of the meeting of-'the Board or nearest possible date.
3. Filing of documents with
Registrar.-File all the above documents with the Registrar of Companies concerned
within five weeks before the passing of the resolution for winding up.
4. Passing of Special Resolution.-A Special Resolution of the
company "resolution for voluntary winding up" has to be passed at the
General Meeting.
5. Appointment of Liquidator
and fixing of his remuneration.-Appoint a Liquidator either at the same meeting or
at a subsequent meeting and his remuneration should be fixed.
6. Advertisement of notice
in newspaper and Official Gazette.-Within fourteen days of the passing of the
resolution, notice to this effect should be advertised in the Official Gazette
and also in newspaper circulating in the district where the registered office
of the company is situate.
7. Filing of notice of
appointment with Registrar.-Notice of appointment of the Liquidator should be
given in Form No. 152 of the Companies (Court) Rules 1959 by filing it with the
Registrar of Companies concerned within ten days.
8. Filing of Form along with
Explanatory Statement with Registrar.-File Form No. 23 together with Explanatory
Statement with the Registrar of Companies concerned on payment of' prescribed
filing fee within thirty days. Non-filing will attract penalty by way of
fine of up to Rs. 100/-.
9. Company ceases to carry
on business.-The company will cease to carry on the business except so far as may be
required for the beneficial winding up of such business.
10. Voluntary winding up
does not put an end to corporate existence of company.-A voluntary winding-up does
not put an end to tile corporate existence of the company. The company exists
until it is dissolved. The Liquidator is treated as a person in the position of
an agent for the company performing his duties in accordance with the
provisions of the Act. Knowles v. Scott, (1891) 1 Ch 7 17; Pulsford v.
Devenish, (1903) 3 Ch 625.
Voluntary winding up
"RESOLVED that pursuant to section 484(l)(a) of the Companies Act, 1956, the purpose for which the Company was formed having been fulfilled, the Company be wound LIP voluntarily and that the Secretary be instructed to give notice of this resolution by advertisement in the Official Gazette and also in two newspapers, one in English and one in vernacular language circulating in the district of the registered office of the Company within fourteen days from this date.
RESOLVED FURTHER that
pursuant to section 490(l) of the Companies Act, 1956, Mr. ABC of the firm M/s.
ABC & Company, the solicitors, be and are hereby appointed as the
Liquidator for the purpose of such winding up at a remuneration to be fixed by
the Board of Directors and that the Secretary be instructed to give a notice of
such appointment to the Registrar of Companies."
1. Special Resolution
required to wind up company voluntarily.-A Special Resolution is
required to be passed under clause (b) of sub-section (1) of S. 484 it'
there exists no limiting factor as to the life of the company either in the
articles or in any other documents of the company as in the above resolution.
Even prosperous and solvent companies may be wound up by passing a Special
Resolution without assigning any reason. No article of the company can prevent
the exercise of this statutory right.
2. One or more liquidators
can be appointed to wind up company voluntarily. -Under section 490, the company
can appoint one or more Liquidator(s) for the purpose of winding up the affairs
and distributing the assets of the company and can also fix his or their
remuneration but before such remuneration is fixed, as mentioned in the
resolution above, the Liquidator or Liquidators shall not be liable to take
charge of his or their office. Firm of Chartered Accountants may also be
appointed as Liquidators of a company in winding up. (Letter No. 1/1/69-CL.
III, dt. 2-4-1975.)
3. Voluntary winding up does
not put an end to corporate existance of company.-A voluntary winding up does
not put an end to the corporate existence of the company. The company exists
until it is dissolved, but Board's power is assumed by the Liquidator appointed
by the company in a General Meeting under section 490.
4. Notice regarding
appointment of liquidator.-Within fourteen days of passing the resolution, the
company should give a notice (under section 485) of the resolution by
advertisement in the Official Gazette and in newspaper circulating in the
district where the registered office is situated and also to the Registrar
about the appointment of a Liquidator by it under section 490.
5. Procedure to be followed
for members' voluntary winding up.-A step by step account of' the procedure for
putting the company into members voluntary winding up would be as follows-
(i) Call a Board Meeting
within six weeks immediately preceding the date of resolution for winding up
and make sure that the company can pay its debts in full within a period of
three years if put into liquidation. Make a declaration to this effect in Form
No. 149 of the Companies (Court) Rules 1959 (Rule 313 of the said Rules).
Declaration will be accompanied by-
(a) the audited balance-sheet
and the profit and loss account commencing from the date of tile last audited
balance-sheet and the profit and loss account ending with the latest
practicable date before the date of declaration, and
(b) a statement
of the company's assets and liabilities as at that date (Section 488).
(ii) Approve in the said
meeting the draft of the resolution for putting the company into members'
voluntary winding up and appointing Liquidator(s) and fixing his/their
remuneration (Section 490). If the winding up takes place as per the period or
event prescribed in the Articles of Association, then the resolution will be an
Ordinary Resolution, otherwise a Special Resolution (Section 484). A body
corporate cannot be appointed as a Liquidator (Section 513).
(iii) Get the declaration
duly verified by an affidavit before a Magistrate and file the same with the
Registrar before the meeting is held for passing the resolution for winding up
(Section 488).
(iv) Hold the General
Meeting and pass the resolution as mentioned in item (ii) hereof. The winding
up commences from the time of passing the resolution (Section 486).
(v) Within ten days of the
passing of the resolution, file notice with the Registrar for the appointment
of the Liquidator in Form No. 152 of the Companies (Court) Rules 1959 (Section
493).
(vi) Submit to the
Liquidator a statement on the company's affairs in Form 57, in duplicate, duly
verified by an affidavit in Form No. 58 within twenty-one days of the
commencement of winding up (Section 454 via Section 51 IA and B Rule 127 of the
Companies (Court) Rules 1959).
(vii) File the resolution
for winding up with Explanatory Statement with the Registrar within thirty days
of the passing in Form No. 23 (Section 192).
(viii) Within fourteen days
of passing of the resolution give notice of the resolution by advertisement in
the Official Gazette and also in some newspapers circulating in the district
where the registered office of the company is situated (Section 485).
(ix) The Liquidator has to
file the notice of his appointment with the Registrar in Form No. 152 of the
Companies (Court) Rules 1959 and publish the same in the Official Gazette in
Form No. 151 of the said Rules within thirty days of his appointment (Section
516 and Rule 315 of the Companies (Court) Rules 1959). The Liquidator has also
to give notice of his appointment to the Income-tax Officer of the
company within thirty days of his appointment (Section 178 of the Income-tax
Act, 1961).
(x) If a vacancy occurs by
death, resignation or otherwise in the office of the Liquidator, call a General
Meeting to fill up the vacancy (Section 492). Inform the Registrar of the
vacancy and repeat the formalities as stated in items (v) and (viii) hereof.
(xi) If, in the case of a winding-up which has commenced after the 1st April, 1956, the Liquidator is at any time of the opinion that the company will not be able to pay its debts in full within the period stated in the declaration of solvency, or that period has expired without the debts having been paid in full, he has to summon forthwith a meeting of creditors, and has to lay before tile meeting a statement of the assets and liabilities of the company in Form No. 150 of the Companies (Court) Rules 1959 (Section 495 and Rule 314 of the Companies (Court) Rules).
(xii) If the process of
winding up continues for more than a year, call a General Meeting within three
months from the end of every year from the date of commencement of winding up,
or within such longer period as the Central Government may allow, and lay
before the meeting the Liquidator's account of his acts and dealings together
with the statement in Form No. 153 of the Companies (Court) Rules 1959 duly
verified in Form No. 154 of the said Rules (Section 496). Where the case falls
under item (xi) above, then the meeting of creditors will also be likewise
called except in case of the meeting at the end of' the first year where tile
same shall not be required to be called unless the meeting held under item (xi)
hereof has been held more than three months before the end of the year (Section
498 and Rule 328 of the Companies (Court) Rules 1959).
(xiii) If winding up is not
concluded within a year after its commencement, then the Liquidator shall file
statements with the Registrar twice in every year (Rule 327 of the Companies
(Court) Rules 1959).
(xiv) Get the first year's
statement audited for the full year, that is the period commencing from the
date of appointment of the Liquidator to the end of twelve months, from the
commencement of the winding up, and thereafter subsequent statements every six
months (as at present prescribed), in Form No. 153 of the Companies (Court)
Rules 1959 and get them verified in Form No. 154 of the said Rules and file the
same with the Registrar, in duplicate, within two months from the year end
(Section 551 and Rule 327 of the Companies (Court) Rules 1959). The Auditors'
report will be in the form as agreed to between the Government and the
Institute of Chartered Accountants of India, a copy of which may be had from
the Registrar's office. Even where there is no receipt and payment, the said
statement shall be filed stating accordingly.
(xv) Complete the winding up
by realising all assets and paying off' all liabilities and returning share
capital and surplus, if any. The provisions of sections 426 to 432, 452, 487,
491, 494, 511, 511 A, 512, 514, 515, 517 to 520, 528 to 549 and 533 to 536 and
those of Rules from Nos. 124 to 134 and Nos. 312 to 361 of the Companies
(Court) Rules 1959 should also be noted in this respect.
(xvi) As soon as the affairs
of the company are fully wound up, prepare the Liquidator's account of the
winding up in Form No. 156 of the Companies (Court) Rules 1959 (Section 497)
and get the same audited as stated in item (xiv) above.
(xvii) Call the final
General Meeting by giving notice in Form No. 155 of tile Companies (Court)
Rules 1959 by advertisement to be given not less than one month before the
meeting In the Official Gazette and also in some newspaper circulating in the
district where the registered office of the company is situated; place the
above account in the same and give an explanation hereof (Section 497). If the
case falls within item (x) above, then call the creditors meeting also likewise
(Section 498).
(xviii) Pass also the
Special Resolution for disposal of the books and papers of the company when the
affairs of the company are completely wound up and it is about to be dissolved
(Section 550).
(xix) Within a week of the
final meeting (and where the case falls within item (x) hereof, then within a
week of the members' meeting or the creditors' meeting whichever is held
later), file the copy of the above account with the Registrar as well as with
the Official Liquidator and file a return to each of them in Form No. 157 of
the Companies (Court) Rules 1959. If a quorum is not present, file the return
in Form No. 158 of the Companies (Court) Rules (Sections 497 and 498 and Rule
331 of the Companies (Court) Rules 1959).
(xx) The Registrar, on
receiving the account and either the return mentioned in subsection (3) of
section 497, or the return mentioned in sub-section (4) of section 497,
shall forthwith register them (Section 497(5)).
(xxi) The Official
Liquidator, on receiving the account and either the return mentioned in sub-section
(3) of section 497, or the return mentioned in sub- section (4) of section
497, shall, as soon as may be, make (and the Liquidator and all officers, past
or present, of the company shall give the Official Liquidator all reasonable
facilities to do so); a scrutiny of books and papers of the company and if on
such scrutiny the Official Liquidator makes a report to the Court, that the
affairs of the company have not been conducted in a manner prejudicial to the
interest of its members or to the public interest, then, from the date of the
submission of the report to the Court, the company shall be deemed to be
dissolved (Section 497(6)).
(xxii) If on such scrutiny
the Official Liquidator makes a report to the Court that the affairs of the
company have been conducted in a manner prejudicial, as aforesaid, the Court
shall by order direct the Official Liquidator to make further investigation of
the affairs of the company and for the purpose shall invest him with all such
powers as the Court may deem fit (Section 497(6A)).
(xxiii) On receipt of the
report of the Official Liquidator on such further investigation, the Court may
either make an order that the company shall stand dissolved with effect from
the date to be specified by the Court therein or make such other order as the
circumstances of the case brought out in the report permit (Section 497 (613)).
(xxiv) File the Special
Resolution mentioned in item (xviii) hereof with the Registrar within thirty
days of passing in Form No. 23 (Section 192).
(xxv) The Court may, in a
fit case, declare the dissolution void within two years of the date of the
dissolution on application by the Liquidator of the company or by any other
person who appears to the Court to be interested. A person who obtains the said
order of the Court shall file the certified copy of the Court order with the
Registrar within thirty days or such further time as may be allowed by the
Court (Section 559).
Declaration of solvency
"RESOLVED that the
Declaration of Solvency and the statement on Estimated Realisable Value of
Assets and Liabilities thereto payable by the Company as on 30th September,
2002 taken on oath by the directors be and are hereby confirmed, approved and
adopted by this meeting to be presented to the High Court."
1. Making of Declaration of
Solvency.-The following points are to be noted while making declaration of
solvency:
(a) The declaration of
solvency must be made within five weeks before the passing of the resolution
for winding up and accordingly, if that period is exceeded a new declaration
will have to be made, conforming to the time- limit.
(b) The declaration must be
made at a Board meeting, and verified by an affidavit. The section does not
require that there should be an affidavit by each of the directors making the
declaration. An affidavit by one director is sufficient. (Collector of
Moradabad v. Equity Insurance Co. Ltd., (1948) 18 Comp Cases 309, 317: AIR 1948
Oudh 197.)
(c) The declaration must be
registered with the Registrar before the date of the resolution.
(d) The declaration must
specify a period not exceeding three years, within which in the opinion of the
directors the company will be able to pay its debt in full.
(e) The declaration must
embody a statement of the company I s assets and liabilities as at the nearest
practicable date before the declaration.
(f) Where the declaration of
solvency is not made in accordance with law, the resolution of winding up and
all subsequent proceedings will be null and void. (Shri Raja Mohan Manucha v.
Lakshminath Saigal, (1963) 1 Comp LJ 285: (1963) 33 Comp Cases 719 (All)).
2. Penalty.-Any director of a company
making a declaration without having reasonable grounds for the opinion will be
punishable with imprisonment of 6 months or with fine of up to Rs. 50,000/-
or with both.
"RESOLVED that the
Directors of the Company after having made a full inquiry into the affairs of
the company have formed the opinion that the Company has no debts or will be
able to pay its debts in full within ________ months from the
commencement of the winding up, and a copy of the said declaration of solvency
placed before this meeting be and is hereby approved."
1. Making of declaration.-The declaration of solvency
must be made within five weeks before the passing of the resolution for winding
up and accordingly, if that period is exceeded a new declaration will have to
be made, conforming to the time-limit.
2. Declaration to be made at
Board Meeting.-The declaration must be made at a Board Meeting and verified by an
affidavit. The section does not require that there should be an affidavit by
each of the directors making the declaration. An affidavit by one director is
sufficient. (Collector of Moradabad v. Equity Insurance Co. Ltd., (1948) 18
Comp Cases 309, 317: AIR 1948 Oudh 197).
3. Declaration to be
registered with Registrar.-The declaration must be registered with the
Registrar before the date of the resolution.
4. Declaration to specify
the period.-The
declaration must specify a period not exceeding three years, within which in
the opinion of the directors the company will be able to pay its debt in full.
5. Declaration must
accompany statement of assets and liabilities.-The declaration must
embody a statement of the company's assets and liabilities as at the nearest
practicable date before the declaration.
6. When declaration not made
in accordance with law, its effect.-Where the declaration of solvency is not made
in accordance with law, the resolution of winding up and all subsequent
proceedings will be null and void. (Shri Raja Mohan Manucha v. Lakshminath
Saigal, (1963) 1 Comp LJ 285 :(1963) 33 Com Cases 719 (All)).
7. Statement of assets and
liabilities not vitiated at subsequent stage if it contained some error.-While it is a condition that
a declaration must be accompanied by a copy of the auditor's report and a
statement of the company's assets and liabilities, the declaration is not vitiated
by the fact that at a subsequent stage it appears that the statement contained
some errors or omissions.
8. Presumption may be drawn
in members' voluntary winding up that debts be paid in full.-Under the members' voluntary
winding up there is a presumption, until the contrary is shown, that all the
debts of the company will be paid in full and it must be taken that the company
is solvent when there is no evidence to the contrary. (Gerard v. North of Paris
Ltd., (1936) 2 All ER 905).
9. Declaration when a
nullity.-While failure to satisfy the conditions in clauses (a) and (b) of sub-section
(2) makes the declaration "of no effect" i.e., a nullity, a mere
error or omission, while it may expose the declarant to the penal consequences,
will not prevent the statement from being a statement for the purpose of
satisfying the requirements of the section. [De Courcy v. Clement, (1971) 1 All
ER 681: (1971) 41 Com Cases 796 (Ch D).]
Relevant Rules.-For Form of declaration, see
Form No. 149 referred to in Rule 313 of Companies (Court) Rules 1959.
Fixing remuneration of
Liquidator in a member's voluntary
winding up
"RESOLVED that the
remuneration of Mr. ABC, the Liquidator appointed for the purpose of winding up
be and is hereby fixed at the rate of ________ % of the value of the assets recovered by the Liquidator in the
winding up."
1. Fixation of remuneration
of liquidator.-It is open to the company to fix the remuneration of the Liquidator
either at a fixed sum or on a percentage of the property of the company
recovered by him.
2. Liquidator cannot take
charge of office until remuneration fixed.-The Liquidator cannot take
charge of his office until his remuneration is fixed.
3. Remuneration once fixed cannot be increased
except with sanction of Court. - The remuneration fixed by the General Body cannot be
increased without the sanction of Court.
Authority to the Board of Directors to continue exercising
its powers
RESOLVED that pursuant to
section 491 of the Companies Act, 1956, and subsequent to the appointment of
Mr. ________________ as the liquidator of the company the Board of
Directors of the Company be and is hereby authorised to exercise its usual
powers for the purpose of carrying on the normal business of the company
necessary to carry out the winding up of the company properly and
beneficially.
1. Ceasure of Board's power.-Section 491 provides that as
soon as the liquidator is appointed all the powers of the Board of Directors
and of the managing director or whole-time director and manager, if any,
shall cease except for the purpose of giving notice of such appointment to the
Registrar of Companies in pursuance of section 493 or in so far as the company
in general meeting or the liquidator may sanction the continuance thereof.
Power to fill vacancy in the
office of Liquidator
"RESOLVED on the
resignation of Mr. CDE of the firm of M/s. CDE & Company, the solicitors,
who was appointed as the Liquidator of the Company, that Mr. ABC of the firm of
M/s. ABC & Company, be and is hereby appointed as the Liquidator of the
company to fill the vacancy and that he be remunerated at a fixed rate of Rs.
500 plus reimbursement of actual expenses, if any, in connection with the
performance of his duties."
1. Power to contributories
and other liquidators.-Section 492 gives powers to the contributories and
to the other Liquidators, if any, to fill the vacancy of the office of any of
the Liquidators caused by death, resignation or otherwise. The appointment of
Liquidators to fill vacancy should be made in a General Meeting of the company.
Authorisation to Liquidator to accept shares etc. as consideration
for
sale of property of the company (S. 494)
The power or authority to
the Liquidator for the purpose of this section can be conferred on him only by
sanction of a Special Resolution and that the sale or transfer can be made only
in favour of another company and not to any other person or to a trustee of a
company intended to be incorporated or about to be formed. Ex parte Fox, (1871)
6 Ch App. 176.
for sale of property
"RESOLVED that the
property of the Company at No. 15, Kasturba Gandhi Marg, New Delhi be and is
hereby sold to ABC Ltd. for Rs. 100 lakhs.
RESOLVED FURTHER that Shri
OPM, Liquidator of the Company be and is hereby authorised in pursuance of
section 494 of the Companies Act, 1956 to finalise the sale and accept Equity
shares of Rs. 10/- each in ABC Ltd. in full and final settlement of sales
consideration on the terms and conditions as embodied in the draft agreement, a
copy whereof submitted to the meeting initialled by the Chairman of the meeting
for the purposes of identification.
RESOLVED FURTHER that Shri
OPM, Liquidator of the Company be and is hereby authorised to execute the said
agreement with such modification as he may think deem fit and proper."
1. Applicable to Members
Voluntary Winding up.-The section applies only to a members' voluntary
winding up. But in the case of a winding up under supervision or a compulsory
winding up, similar procedure may be adopted under the powers given to the
liquidator and the Court under section 457(l)(c) of the Act.
2. Reference of section 494
a must.-Ensure
that the notice of meeting must specifically refer to section 494. (Imperial
Bank o China, India and Japan v. Bank of Hindustan, China and Japan, (1868) LR
Eq 91).
3. Filing of Special
Resolution.-File Form No. 23 along with Special Resolution within thirty days of
the passing thereof with the Registrar of Companies concerned. Non-filing
will attract penalty by way of fine of upto Rs. 100/-.
4. Prohibition of right to
dissent when void.-Any provision in a Company's memorandum or articles negativing the
right of a member to dissent is not valid. (Payne v. The Cork Co. Ltd., (1990)
1 Ch 308).
"RESOLVED that consent
of the members be and is hereby accorded to the Company for the sale of the
Steel Plant at Ghaziabad to Messrs ABC Limited at a price of Rs. 50 lakhs and
that pursuant to the provisions of section 494 of the Companies Act, 1956, Shri
XYZ the Liquidator of the Company be and is hereby authorised to finalise the
sale of the aforesaid plant of the Company and to receive by way of
compensation equity shares of Messrs. ABC Limited representing the value of the
said amount, as per terms and conditions given in the draft of the agreement
placed before the meeting and initialled by the Chairman for purposes of
identification and to execute the same with Messrs ABC Limited."
1. Convening of Board
Meeting.-Call a meeting of the Board and pass the above resolution recommending
it to the shareholders for being passed by them as a Special Resolution. Fix up
time, date, place and agenda of a General Meeting.
2. Notice of General
Meeting.-Give 21 days' clear notice of the General Meeting to the shareholders.
3. Filing of Form No. 23
along with Explanatory Statement with Registrar.-File Form No. 23 along with
Explanatory Statement with the Registrar of Companies concerned within thirty
days of the passing of the resolution.
4. Section 494 must be
mentioned in notice of meeting.-Mention of section 494 is must in the notice of the
meeting.
5. Authorisation to
liquidator by special resolution only.-The power or authority to the Liquidator for
the purpose of this section can be conferred on him only by sanction of a
Special Resolution and that the sale or transfer can be made only in favour of
another company and not to any other person or to a trustee of a company
intended to be incorporated or about to be formed. Ex parte Fox, (1871) 6 Ch App
176.
6. Authority of liquidator
to accept shares extends for distribution among members.-The authority of the
Liquidator under the section as regards receiving shares etc. extends only for
distribution or arrangement among the members.
7. Authorisation to
liquidator may be for whole or part of business.-The power of the Liquidator
may be for the whole or any part of the business or property proposed to be
transferred or sold to another company.
Statement of accounts of Government company in liquidation
(Ss. 462, 551 and 619A)
By the Companies (Amendment) Act, 1988, sections 462, 551 and 619A have been amended. Now the half-yearly and yearly accounts of a Government company in Liquidation will have to be forwarded by the liquidator to the concerned Administrative Ministry under Central/State Government for being laid before the Parliament or State Legislature as the case may be.
S. 496-Approving
annual statement of affairs-Ordinary Resolution
"RESOLVED that the acts
and dealings of the Liquidator and of the conduct of the winding up during the
year ended the ________, 2002 ________ together with a statement
showing the progress of liquidation be and are hereby confirmed and
approved."
1. Duty of liquidator to
call meeting.-In the process of winding up, the Liquidator is to call a meeting of
the company at the end of the first year from the commencement of the winding
up and at the end of each succeeding year, or as soon thereafter as may be convenient
but not later than three months from the end of the year or such longer period
as the Central Government may allow.
2. No fee to be paid by
liquidator on application for extension of time.-Any application made to the
Central Government (Regional Director) by the Liquidator for granting extension
of time under section 496(l)(a) need not be accompanied by any fee. (Circular
No. 30/75(3/10/ 75-CL. V and 3/15/75-CL. III), dt. 3-2-1976).
"RESOLVED that pursuant
to section 497 and subject to the provisions of section 498, the accounts
submitted before this meeting by the Liquidator showing in detail and with
supporting statement the manner in which the winding up has been conducted and
the property of the Company has been disposed of, be and is hereby approved and
that the Liquidator be instructed to send a copy of the aforesaid accounts to
the Registrar of Companies and to the Official Liquidator and also send a return
as to the holding of this meeting to each of them within one week hereof."
1. Voluntary liquidator to
call general meeting of company when affairs of company fully wound up.-The Liquidator under the
voluntary winding up shall call a meeting as soon as the affairs of the company
are fully wound up.
2. Notice of Meeting.-The meeting should be called
by advertisement, specifying the time, place and the object of the meeting and
published not less than one month before the meeting in the Official Gazette
and also in some newspapers circulating in the district where the registered
office is situated. Within one week after the meeting, the Liquidator should
send to the Registrar and the Official Liquidator a copy of the accounts and
should make a return to each of them, of the holding of the meeting and of the
date thereof.
3. Voluntary liquidator to
furnish Income-tax and Sales-tax clearance certificate of Official
Liquidator.-If the voluntary Liquidator cannot show income-tax or sales tax
clearance certificates to the Official Liquidator, then the Official Liquidator
should obtain an affidavit from the voluntary Liquidator stating that the
company in liquidation does not have any income-tax or sales tax due.
(Circular No. 17/76 (1/1/76-CL.V) dated 28-61975).
4. Dissolution of company
when takes place.-The dissolution of company takes place on the expiry of three months
from the date of registering by the Registrar of the return made by the
Liquidator under sub- section (3) or sub-section (4) of Section 497
of the Act and not from the date of filing of it by the liquidator.
5. Court's power after
dissolution.-Section 559 of the Act enables the Court to make an order declaring the
dissolution void at any time within two years after the date of dissolution.
Appointment of Committee of
Inspection
"RESOLVED that the
Committee of Inspection consisting of the under noted persons be and is hereby
appointed:
1. Mr. ________________
2. Mr. ________________
3. Mr. ________________
4. Mr. ________________
5. Mr. ________________
1. Object.-The object of Committee of
Inspection is to watch and supervise the proceedings of the Liquidator.
2. Members of Committee not
to exceed rive persons.-The members of the Committee of Inspection shall not
be more than five persons.
3. Right of Creditors to
disapprove nominees of shareholders.-The creditors have a right to disapprove of
all or any of the nominees of the shareholders; and in such an event, unless
and until the Court is moved to appoint others in the place of those
disapproved, the committee itself, it would appear, cannot function with the
remaining members.
4. No similar provision
exists in members' voluntary winding-up.-It will be noted that there
is no similar provision for the appointment of a committee-of inspection
in a members' voluntary winding-up.
5. Applicability of sub-sections
(2), (3), (4), (5), (6) and (10) of section 465 to Committee of Inspection
appointed in creditors' voluntary winding up.-Subsections (2), (3), (4),
(5), (6) and (10) of section 465 shall be applicable with respect to a
committee of inspection appointed in a creditors' voluntary winding up under
section 503.
6. Sub-sections (7),
(8), (9) of section 465 not applicable.-Sub- sections (7), (8)
and (9) of section 465 shall not apply with respect to the committee, and sub-rules
(3) to (5) shall apply instead.
7. Vacation of Office by
member.-If
a member of the committee is adjudged an insolvent, or compounds or arranges
with his creditors, or is absent from five consecutive meetings of the
committee without the leave of those members who, together with him self
represent the creditors or the company, as the case may be, his office shall become
vacant.
8. Removal of Member.-A member of the committee
may be removed at a meeting of the creditors if he represents the creditors, or
by the company in general meeting if he represents the company, by an ordinary
resolution of which seven days' notice has been given stating the object of the
meeting.
9. Filling up of vacancy.-On a vacancy occurring in a
committee, the liquidator shall forthwith summon a meeting of the creditors or
a general meeting of the company, as the case may require to fill the vacancy,
and the meeting may, by resolution, re-appoint the same, or appoint
another person to fill the vacancy.
10. Liquidator may not fill
up the vacancy.-If the liquidator, having regard to the position in the winding-up
is of the opinion that it is unnecessary for the vacancy to be filled, he may
apply to the Court; and the Court may make an order that the vacancy shall not
be filled except in such circumstances as may be specified in the order.
Appointment of Committee of Inspection on behalf of company
RESOLVED that the following
five persons be and are hereby appointed by the company to act as members of
the committee of inspection:-
Mr. ABC
Mr. DFS
Mr. OPQ
Mr. LMC
Mr. ZYN
RESOLVED FURTHER that the aforesaid persons do act in coordination with the members of the Committee of Inspection appointed by the creditors of the Company.
PRACTICE NOTES
Same as given under Resolution 1140.
Continuing certain powers of
the Director after liquidation
"RESOLVED that in pursuance of section 505 of the Companies Act, 1956, the Board of Direct 6rs of the company be and is hereby authorised to exercise the following powers in relation to the affairs of the company, notwithstanding the appointment of the Official Liquidator as the liquidator of the company.
(a)
(b)
(c)
1. Power of Director ceases
on appointment of liquidator.-As soon as a Liquidator is appointed for the
company, whether it be a provisional Liquidator or otherwise, the powers of the
Directors immediately cease.
2. Committee of Inspection
may approve continuance of certain powers of Directors.-It is, however, open to the
Committee of inspection if one is appointed or to the creditors to approve the
continuance of certain powers of the Directors even after liquidation.
Annual Statement of Affairs
by Liquidator
"WHEREAS the Liquidator
has, pursuant to the provisions of section 508 of the Companies Act, 1956,
submitted before this members, meeting (of creditors) an account of his acts
and dealings and of the conduct of the winding up during the preceding year
ended as on ________, 2000, together with a statement in the prescribed
form and containing the prescribed particulars with respect to the proceedings
in and position of the winding up, the same be and is hereby approved."
1. Meeting in case of
creditors' voluntary winding up.-This meeting is to be held in the case of creditors
voluntary winding up.
2. Account submitted by
liquidator before meeting of creditor.-The account submitted by the Liquidator
should be separately placed before a meeting of the creditors.
"RESOLVED that the
accounts of acts and dealings and of the conduct of the winding up for the
period ended 31st March, 1995, together with statement in the prescribed form
and containing the prescribed particulars with respect to the proceedings in
and position of the winding up as submitted by the Liquidator at the meeting of
the creditors pursuant to section 508, be and is hereby approved."
1. Accounts to be submitted
by liquidator within three months from end of year.-The accounts are to be
submitted by the Liquidator within three months from the end of the year or
such further extension of time as may be allowed by the Central Government.
2. Accounts to be submitted
by liquidator in Form 153.-The Liquidator has to submit the statement of the
accounts in Form 153 given in the Companies (Court) Rules, 1959.
3. Return in Form 158 and
copy of account in Form 156 to be filed within one month of final meeting.-A return in Form 158 and
copy of the account in Form 156 given in the Companies (Court) Rules, 1959, is
to be filed within one week of the final meeting.
4. Time can be extended by
Regional Director.-The meeting must be convened within three months of the end of the year
unless the Regional Director to whom the power of Central Government is
delegated gives a further extension of time.
Binding arrangement under
winding up with the creditors.
S. 517-Arrangement
with the creditors-Special Resolution
"RESOLVED that the
scheme of arrangement with the creditors of the company be and is hereby
approved on the terms and conditions set out in draft agreement herein tabled
and initiated by the Chairman for the purpose of identification, and that Mr.
ABC and Mr. XYZ be authorised to execute the agreement with the creditors
thereof."
1. Section 517 applicable to
both members' and creditors' voluntary winding up.-Section 517 of the Act
applies both to a members' voluntary winding up and a creditors' voluntary
winding up.
2. Arrangement to be
sanctioned by Special Resolution.-In order to be binding upon the contributories, the
arrangement has got to be sanctioned by a special resolution of the company and
to be binding on the creditors by 3/4th both in number and in value of the
creditors.
Binding arrangement by
creditors under winding up
(Another format)
S. 517-Accompanying
resolution of creditors-Special Resolution
"RESOLVED that this
meeting of the creditors of M/s. XYZ & Company Ltd., representing more than
three-fourths in number and value of the total creditors, duly listed and
tabled herewith hereby accede to the scheme of arrangement with the said
company in terms of a draft agreement herewith tabled and that Mr. PQR and Mr.
BCD be and they are hereby authorised to act, execute or take action in
connection with the draft agreement with the company."
1. Section 517 only an
enabling provision.-Section 517 is an enabling provision whereby the creditors can
compromise the debts owing to them.
2. Court's initiative in
compromising debts to save company from being wound up.-Court can and often does
persuade the company and the creditors to enter into a compromise which may
save the company from being wound up.
3. Appeal by dissenting
majority.-Right of appeal has been given under this section to any creditor or
contributory. Appeal must be filed within three weeks from the completion of
the arrangement.
Liquidator to compromise
debts
"RESOLVED that subject
to the sanction of Court, the Liquidator of the Company be and is hereby
authorised to compromise the debts and liabilities of the unsecured creditors
and debenture- holders, in accordance with the scheme of compromise
placed before the meeting and duly initialled by the Chairman."
1. Approval of 3/4th
majority of creditors required for compromising debts.-The creditors will have to
approve the resolution by a 3/4th majority, after which the liquidator will
have to place the scheme or the resolution authorising him to pay or
compromise, as the case may be, before the Court for approval.
2. Notice by liquidator to such
person as directed by court.-The Court may direct the Liquidator to give notice
to such person as it may deem fit.
3. Compromise cannot be
enforced upon unwilling creditors.-It is to be noted that unlike section 391, an
arrangement or compromise cannot be enforced either by the liquidator or the
Court upon unwilling creditors. (Re Albert Life Assurance Co. Ltd., (1871) 6 Ch
App 381).
Sanctioning payment to a
class of creditors
"RESOLVED that pursuant to section 546 of the Companies Act, 1956 and subject to the sanction of the Court, the Liquidator be and is hereby authorised to sell the machinery of the company and utilise the sale proceeds to satisfy in full the claims of the suppliers against the company."
1. Power of court to order
payment in full to any class of creditors.-The Court has a discretion
to order payment in full to any classes of creditors other than those referred
to in Section 530 of the Act. (Peoples Bank Ltd. v. Lucknow Sugar Works Ltd.,
AIR 1936 Oudh 338).
2. Court cannot compel
unwilling liquidator to compromise debt.-The Court cannot compel an
unwilling liquidator to compromise a debt due to the company in liquidation.
"RESOLVED that pursuant
to the provisions of section 497 of the Companies Act, 1956, Mr. CDE, the
Liquidator, be and is hereby authorised to preserve the books and papers of the
company and to maintain all statements, vouchers and registers at least for
five years from date."
1. No rules framed for
preservation/destruction of books.-The Central Government has not framed any
rules under section 550(3) and (4) but Rule 15 of the Companies (Central
Government's) General Rules and Forms provides for preservation and destruction
of the books and papers of a company in winding up.
2. Voluntary liquidator can
be ordered to produce books etc.-Where a company was dissolved after voluntary
winding up, the Liquidator being in control of the books and papers, could be
ordered to produce them. London & Yorkshire Bank v. Cooper, (1885) 15 QBD
473.
Disposal of books and papers
in winding up
"WHEREAS the company is
under members' voluntary liquidation;
AND WHEREAS a General
Meeting has been held pursuant to section 497 of the Companies Act, 1956, to
wind up and dissolve completely the affairs of the company;
NOW THEREFORE IT IS RESOLVED
that books and papers of the company and those of the Liquidator be kept for
safe custody at the house of Mr. ________________________ a Director of
the company, for a period of five years from the date hereof after which such
books and papers may be destroyed. "
1. Special resolution to be
passed for disposal of books.-Following the Vivian Bose Commission recommendations
section 497 and section 509 were amended to provide that a company which has
been brought under voluntary liquidation should not be dissolved until the
Official Liquidator has scrutinised the books and papers of the company and
given his report to the Court. Pursuant to sub-section (1)(b) of section
550, disposal of books and papers in the case of a members' voluntary winding
up, should be done in such a manner as the company may, by Special Resolution,
direct.
2.
Creditor/Contributory/Liquidator may make representation to Court for early destruction
of books.-No specific rules have been framed by the Central Government under
section 550(3) but Rule 15 of the Companies (Central Government's) General
Rules and Forms, 1956, dealing with section 550(3)(a) and (b), provides that
except as provided in this rule or in an order of the Court made in pursuance
of section 550, the books and papers of a company which has been wound up and
of its Liquidators shall not be destroyed for a period of five years from the
date of dissolution. Any creditor or contributory of any such company may make
re-presentation to the Central Government in writing with regard to the
desirability of destroying all or any of the books and papers of the company
and of its Liquidator, at an earlier point of time. Even the Liquidator himself
can make representations to the Central Government in writing for an early
destruction of his books and papers and those of the company. Any creditor or
contributory of the company may appeal within ninety days from any direction
given by the Central Government against such representation. A copy of such
appeal must also be forwarded to the Central Government.
3. Passing of Special
Resolution is must.-The effect of passing a Special Resolution under section 550(l)(b) is
that without a resolution so passed, it will be presumed that the process of
liquidation of the company is continuing.
company
RESOLVED that pursuant to
section 550(l)(b) of the Companies Act, 1956 the books and papers of the
Company and those of the liquidator be and are hereby disposed of in the
following manner:
(1) They should not be
destroyed for a period of 5 years from the date of dissolution of the company;
(2) Till such books and
papers are destroyed as above they should be kept in safe custody of the main
banker of the Company.
(3) On the expiry of the
period of 5 years, these books and papers should be destroyed and a Register
should be maintained entering therein brief particulars of the books and papers
destroyed and be initialled by the person destroying them in presence of a
witness who shall sign his name and give his address thereon.
Same as given under Resolution 1149 and 1150.
Disposal of books and papers
in voluntary winding up
S. 550-Disposal
of books and papers in voluntary winding up-Special Resolution
"RESOLVED that in
accordance with the provisions of section 497 of the Companies Act, 1956 and
other applicable provisions, if any, Mr. XYZ, the Liquidator be and is hereby
empowered to preserve the books, and papers and to maintain all registers,
statements for a period of five years from now onwards."
1. Books to be preserved for
rive years from date of dissolution.-Section 550 makes incumbent on the person in
custody of books to keep the books and papers intact for a period of five years
from the date of dissolution of the company.
2. Voluntary liquidator can
be ordered to produce books etc.-Where a company was dissolved after a voluntary
winding up, the liquidator being in control of the books and papers could be
ordered to produce them. (London & Yorkshire Bank v. Cooper, (1885) 15 QBD
493).
3. No responsibility rests
on any person for production of books etc. after rive years.-After the expiry of five
years from the dissolution of the company, no responsibility shall rest on the
company, the Liquidator or any person to whom the custody of the books and
papers has been committed, by reason of any book or paper not being forthcoming
to any person claiming to be interested therein.
4. Resolution to be passed
when affairs of company completely wound up.-This resolution is passed
when the affairs of a company have been completely wound up and it is about to
be dissolved.
S. 551-Resignation of Liquidator and appointment of
another liquidator in his place-Meeting of contributories-Ordinary
Resolution
RESOLVED that the
resignation of Mr. ________________________ the existing liquidator of
the Company be and is hereby approved and that the fact of such resignation be
published in two newspapers one in English language and one in the Regional
language.
RESOLVED FURTHER that Mr.
________________________ be and is hereby appointed liquidator of the
company at a remuneration of Rs. ________ per annum with immediate
effect.
1. Notice of Appointment of
Liquidator.-Rule 315 of the Companies (Court) Rules, 1959 provides that notice of
appointment of liquidator should be published in the official gazette under
section 516 and the notice is also required be delivered to the Registrar of'
Companies.
2. Duty of liquidator upon
resignation.-Rule 322 provides that upon a liquidator resigning or being released or
removed from his office, he shall deliver over to the new liquidator all books
kept by him and all other books, documents, papers and accounts in his
possession relating to the company or to the office of the liquidator.
Considering erosion of 50%
or more of net worth
RESOLVED that pursuant to
section 23(1)(a)(ii) of the Sick Industrial Companies (Special Provisions) Act,
1985, the report of the Board of Directors of the Company explaining the
reasons on erosion of more than 50% of the Company's peak net worth during the
immediately preceding four financial year be and is hereby considered and
approved.
RESOLVED FURTHER that the
Board of Directors be and is hereby authorised to inform the Board for
Industrial and Financial Reconstruction about the reasons of erosion considered
by the shareholders of the company at the general meeting and to do every act
and deed that is necessary in connection therewith.
1. Time of holding the
General Meeting.-The General Meeting should be held within 60 days from the date of
finalisation of the duty audited accounts of the company for the relevant
financial year and also within the said period of 60 days the fact of erosion
of should be reported to the Board for Industrial and Financial Reconstruction.
2. Net worth.-Net worth means the sum
total of the paid-up share capital and free reserves of a company.