12.18.3 (Voluntary winding up)

Winding up by the creditors or members without

Any intervention of the court is called 'voluntary winding up', in voluntary Winding up, the company and its creditors are left to settle their affairs without going to the court for directions or orders if and when necessary. Winding up should not be confused with insolvency. Company may be solvent and running a prosperous business yet it may decide to be wound up voluntarily, e. g., in pursuance of a scheme of reconstructions or amalgamation.

A company may be wound up voluntarily (1) if the company in general meeting passes an ordinary resolution for voluntary winding up where the period fixed by the article for the duration of the company has expired or the event has occurred on which under the Articles the Company is to be dissolved; (2) if the company resolves by special resolution that it shall be wound up voluntarily (s.484).

When a company has passed a resolution for voluntary winding up, it must within 14 days of the passing of the resolution, give notice of the resolution by advertisement in official Gazette and also in some newspaper circulating in the district where the registered office of the company is situated. In case of default, the Company and every officer of the company who is in default shall be punishable with fine which may extend upto Rs 50 for every day during which the default continues (s.485).

Consequences of voluntary winding up. The consequences of voluntary winding up

are as follows:

1. A voluntary winding up is deemed to commence at the time when the resolution for voluntary winding up is passed (s.486). This will be so even when after passing a resolution for voluntary winding up, a petition is presented for winding up by the court (s.441).

2. The company, from the commencement of winding up, must cease to carry 

on its business except so far as may be required to secure a benefit winding up although the corporate state and powers of the company continue until final dissolution (s.487).

3. All transfer of shares and alterations in the status of members, made after the commencement, are void unless sanctioned by the liquidator (s.536).

            4. A resolution to wind up voluntarily operates as notice of discharge to the employees of the company (Fowler v. Commercial Times Co.) except: (a) when the liquidation is only with a view to 'reconstruction' [Midland Counties Bank Ltd. v. Attwood (1905) 1 Cg.357] or (b) when business is continued by the liquidator for the beneficial winding up of the company.

5. On the appointment of the liquidator, all the powers of the Board of Directors, managing director or 'manager' shall cease except (s.491): (a) for the purpose of giving notice to the Registrar about the name of the liquidator appointed, or (b) insofar as the company in general meeting or the liquidator may sanction the continuance of their powers.