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Voluntary Winding Up of a Company as Per Section-484(1) of Companies Act,1956


Circumstances in which company may be wound up voluntarily:-

(1) A company may be wound up voluntarily:-

a)when the period, if any, fixed for the duration of the company by the articles had expired, or the event, if any, has occurred, on the occurrence of which the articles provide that the company is to be dissolved, and the company in general meeting passes a resolution requiring the company to be wound up voluntarily;

b)if the company passes a special resolution that the company be wound up voluntarily .

(2) If this Act, the expression “a resolution for voluntary winding up “means a resolution passed under clause (a) or (b) of sub-section(1).

Explanation of section:-

484(1) (a):- This clause says that where a company was formed for a fixed period or the 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.

484(1)(b):- This clause says that 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.

Winding up of a Company:-

Winding up of a company referred to the process whereby all the affairs of the company are wound up, all its assets are realized, its liabilities paid off and the balance if any is distributed to its shareholders in proportion to their holding in the company. When the company has been wound up, it is dissolved by order of the Court i.e. its existence ceases.

Prof.L.C.B.Cower-“Winding up of a company is the process whereby its life is ended and its property administered for the benefit of its creditors and members. An administrator called a liquidator is appointed and he takes control of the company, collects its debts and finally distributes any surplus among the members in accordance with their rights”.

Winding Up and Dissolution:-

The terms “Winding up” and “Dissolution” are sometimes erroneously used to mean the same thing. However, they are quite different in their meanings. Winding up is a process whereby all assets of the company are realized and used to pay off the liabilities and members. Dissolution of the company takes place after the entire process of winding up is over. Dissolution puts an end to the life of the company. A dissolution order passed by the Court is like the Death Certificate of the company.

Modes of Winding Up:-

A Company may be wound up in any of the following modes:

1. By the Court i.e. compulsory winding

2. Voluntary winding up, which may be

a) Member’s voluntary winding up;

b) Creditor’s voluntary winding up;

3. Winding up subject to supervision of the Court

Voluntary Winding Up:-

In case of voluntary winding up, the entire process is done without Court Supervision. When the winding up is complete, the relevant documents are filed before the Court for obtaining the order of dissolution. A voluntary winding up may be done by the members as it may be done by the creditors. The circumstances in which a company may be wound up voluntarily are:-

1.When the period fixed for the duration of the company in its articles has expired

2.When an event on the happening of which the company is to be dissolved as per its articles happens..In re, Bailey Hay & Co .Ltd.- (1971)3 ALLER 693 where there were only five shareholders, two of whom held between themselves 50% of the voting power and they passed resolution. Shareholders who abstained from voting on the resolution and allowed it to be passed with knowledge of their power to stop it must be deemed to have assented to the resolution, which was held valid here

3. The company resolves by a special resolution at a general meeting to be voluntarily wound up. A voluntary winding up commences from the date of the passing of the resolution for voluntary winding up. This is so even when after passing a resolution for voluntary winding up, the Court presents a petition for winding up. The effect of the voluntary winding up is that the company ceases to carry on its business except so for as may be required for the beneficial winding up thereof.

Member’s Voluntary Winding Up:-

In case of a company which is solvent and able to pay its liabilities in full and which desires to be wound up voluntarily, the majority of its directors at a Meeting of the Board must make a declaration of solvency verified by an affidavit staling that in their opinion the company will be able to pay its debts in full within such period not exceeding 3 years from the commencement of the winding up as may be specified in the declaration. Such a declaration must be made within 5 weeks immediately preceding the date of the passing of the resolution for winding up the company and be delivered to the Registrar for registration before that date. The declaration must embody a statement of the company’s assets and liabilities as at the practicable date before the making of the declaration. Any director making a false declaration shall be criminally liable to imprisonment as well as with fine extending up to Rs. 50,000.

The company must appoint liquidators for the purpose of winding up and fix their remuneration at a general meeting. On the appointment of the liquidators, the Board of directors, managing director and manager of the company cease to have any management power. The liquidator may transfer or sell the assets of the company and pay off its liabilities. If the winding up proceedings continue for more than one year, the liquidator must call a general meeting at the end of each year the liquidation continues. At the last meeting, the accounts of the liquidator must be approved by the members. Such accounts must be filed by him with the registrar of Companies and the Official Liquidator attached to the Court having jurisdiction over the company.

The Registrar on receiving such accounts must register them. The Official Liquidator on receipt of the accounts and other relevant details must make a report to the Court if he is of the opinion that the affairs of the company have not been conducted in a manner prejudicial to the interest of its members or to public interest. The company shall be deemed to be dissolved from the date of submission of such report. If the Official Liquidator makes a report that the affairs of the company have been conducted in a manner prejudicial to the interest of its members or to public interest, the Court may direct the Official Liquidator to make further investigation of the affairs of the Company. On receipt of the investigation report, the Court may make an order of dissolution or may make such order as it deems fit and proper ion the given circumstances.

Appointment of Official Liquidator (Section 448):-

For the purposes of this Act, so far as it relates to the winding up of companies by the Court, –

a) There shall be attached to each High Court, an Official Liquidator appointed by the Central Government, who shall be a whole-time officer, unless the Central Government considers that there will not be sufficient work for a whole-time officer in which case a part-time officer may be appointed

b)The Official Receiver attached to a District Court for insolvency purposes, or if there is no such Official Receiver, then, such person as the Central Government may, by notification in the Official Gazette appoint for the purpose, and shall be the Official Liquidator attached to the District Court. Central Government may appoint one or more Deputy or Assistant Official Liquidators to assist the Official Liquidator in the discharge of his functions.

Official Liquidator to be liquidator:-

As per section-449-On a winding up order being made in respect of a company, the Official Liquidator shall, by virtue of his office, become the liquidator of the company.

Appointment and powers of Provisional Liquidator (Section 450):-

At any time after the presentation of a winding up petition and before the making of a winding up order, the Court may appoint the Official Liquidator to be liquidator provisionally. Before appointing a provisional liquidator, the Court shall give notice to the company and give a reasonable opportunity to it to make its representations, if any, unless, for special reasons to be recorded in writing, the Court thinks fit to dispense with such notice. Where a provisional liquidator is appointed by the Court, the Court may limit and restrict his powers by the order appointing him or by a subsequent order; but otherwise he shall have the same powers as a liquidator. The Official Liquidator shall cease to hold office as provisional liquidator, and shall become the liquidator, or the company, on a winding up order being made.

Powers of liquidator:-

Section 457 provides that the liquidator in a winding up by the Court shall have power, with the sanction of the Court, (powers exercisable without the sanction of the tribunal)

· To institute or defend any suit, prosecution, or other legal proceeding, civil or criminal, in the name and on behalf of the company;

· To carry on the business of the company so far as may be necessary for the beneficial winding up of the company. Rangai Goundan(M.K.) Re- AIR 1972 Mad 702 “where a voluntary winding up does not put an end to cooperate 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. Reigate v.Union Manufacturing Co.-AIR 1928 Sind 137 where passing of a resolution for voluntary winding up does not operate as notice charge of the employees of the company, if the business is continued by the liquidator or the liquidation is only with a view to reconstruction.

· 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;

· To raise the money on the security of the assets of the company any money requisite.

· To do all such other things as may be necessary for winding up the affairs of the company and distributing its assets. The liquidator in a winding up by the Court shall have power under Section 457 (powers exercisable without the sanction of the tribunal):-

a.To do all acts and to execute, in the name and on behalf of the company, all deeds, receipts, and other documents, and for that purpose to use, when necessary, the company’s seal

b. To inspect records and returns of the company on the files of the Registrar without payment of any fee.

c. To prove, rank and claim in the insolvency of any contributory, for any balance against his estate, and to receive dividends in the insolvency, in respect of that balance, as a separate debt due from the insolvent, and ratably with the other separate creditors.

d.To draw, accept, make and endorse any bill of exchange, or promissory note in the name and on behalf of the company, with the same effect with respect to the liability of the company as if the bill, or note had been drawn, accepted, made or endorsed by or on behalf of the company in the course of its business.

e. To take out, in his official name, letters of administration to any deceased contributory, and to do in his official name any other act necessary for obtaining payment of any money due from a contributory or his estate which cannot be conveniently done in the name of the company, and in all such cases, the money due shall, for the purpose of enabling the liquidator to take out the letters of administration or recover the money, be deemed to be due to the liquidator himself.

f.To appoint an agent to do any business which the liquidator is unable to do himself. Winding up of a company leads to dissolution of the company. When the Court is of opinion that the liquidator cannot proceed with the winding up for want of funds or assets or for any other reason whatsoever, and that it is just and reasonable in the circumstances of the case that an order for the dissolution of the company be made, the Court may make an order that the company be dissolved from the date of the order, and the company is accordingly dissolved. A copy of this order has to be forwarded by the liquidator to the Registrar within 30 days and the Registrar is required to record it in his books.

Creditors’ Voluntary Winding Up:-

Where the company is not solvent or where the declaration of solvency of the company is not made and delivered to the Registrar in a voluntary winding up, it amounts to creditor’s voluntary winding up.

In this case all the provisions of a member’s voluntary winding up apply except that instead of the members, it is the creditors who appoint the liquidator, approve the accounts and regulate the winding up proceedings. The creditors may appoint a Committee of Inspection consisting of not more than 5 creditors in order to regulate and supervise the winding up proceedings. Indian Trading & Engineering Co. Ltd. Re in this cases where the resolution for voluntary winding-up passed by the shareholders was on the basis of a bad notice and though the shareholders at a subsequent meeting appointing liquidators waived the requirement of proper notice and confirmed the resolution and it was held tat creditors can challenge the appointment of liquidator in such circumstances.

Powers of the Court in case of voluntary winding up:-

· It may appoint the Official Liquidator or any other person as liquidator where the appointed liquidator is not acting.

· It may remove the liquidator and appoint the Official Liquidator or any other person as liquidator on justifiable cause being shown.

· It may determine the remuneration of the liquidator when the Official Liquidator is appointed as a liquidator

· It may amend, vary, confirm or set aside the arrangement entered into between a company and its creditors on an appeal made by any creditor or contributory within 3 weeks of the completion of the arrangement

· On an application of the Liquidator or contributory or creditor, it may determine any question arising in the winding up of a company and it may exercise, as respects the enforcing of calls, the staying of suits or other legal proceedings or any other matter, all or any of the powers which the Court might exercise if the company were being wound up by the Court.

· It may set aside any attachment, distress or execution started against the assets of the company after the commencement of the winding up on such terms as it thinks fit on an application made by the liquidator, creditor or contributory if the Court thinks fit.

· It may order a public examination of any person connected with the promotion or formation of the company or any officer connected with the company.

Winding Up Subject To the Supervision Of Court:-

When a company has by special or ordinary resolution resolved wind up voluntarily, the Court may make an order that the voluntary winding up shall continue, but subject to such supervision the Court and with such liberty for creditors, contributories or others to apply to the Court and generally on such terms and conditions, as the Court thinks just.

The application for such intervention of the Court may be made by a creditor, contributory or the voluntary liquidator, when there are irregularities or frauds in the voluntary winding up.

The effect of such an order is: –

1. The liquidator may exercise his powers for liquidation subject to terms and conditions imposed by the Court.

2. The Court obtains jurisdiction over suits and legal proceedings as in case of compulsory winding up by the Court.

3. The supervision order also confers the power on the Court to make calls or to enforce calls made by the liquidators and to exercise all other powers which it would have in case of compulsory winding up by the court.

Effect of Winding up Order (Section 447):-

An order for winding up a company shall operate in favor of all the creditors and of all the contributories of the company as if it had been made on the joint petition of a creditor and of a contributory. A voluntary winding up does not put an end to the cooperate existence of the company .The company exist until it is dissolved. The powers of directors continue to the existent to which they are allowed by the liquidator.


After going through all the research, winding up of company is basically when a company comes into existence by a legal process and when for any reason, it is desired to end its existence; it must go through the legal process of winding up of its affairs. Winding up or liquidation is the process by which the management of a company’s affairs is taken out of its director’s hands, its assets are realized by a liquidator, and its debts are paid out of the proceeds of realization. If any balance remains in the hands of the liquidator, it is divided among the members of the company in accordance with their rights under the articles. However, winding up and dissolution of the company are not one and the same thing. A company is said to be dissolved when it ceases to exist as a corporate body. Winding up precedes dissolution. It is the process by which the dissolution of the company is brought about.

Winding up of company is done in many ways and one of them is voluntary winding up where by through resolutions a company gets wound up. Voluntary winding up requires liquidator who first get appointed and then process the work of winding up of company. Liquidator is the one person who keeps full information regarding the company and these are also appointed by the court and they perform job of supervision as well and distribute the assets of company in a proper manner.

There is also creditor’s voluntary winding up of company where by creditors wind up company and reasons for this may be the losses incurred by the company, where by it’s hard for it to stand on it’s own. In case of liquidator, he has allotted with some powers also and court also has super visionary powers through which it can always find out the actual status of the company and its resolutions.

After taking all the laws into account it’s very important for a company, which is to be wound up, voluntarily to follow the provisions as prescribed under section-484 followed by other supporting provisions.

Juhi Malviya

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