Winding Up Joint Stock Company
A Joint-Stock company is a business entity which is owned by shareholders. Each shareholder owns the portion of the company in proportion to his or her ownership of the company’s shares (certificates of ownership). This allows for the unequal ownership of a business with some shareholders owning a larger proportion of a company than others. Shareholders are able to transfer their shares to others without any effects to the continued existence of the company.
In modern corporate law, the existence of a Joint-Stock company is often synonymous with incorporation (i.e. possession of legal personality separate from shareholders) and limited liability (meaning that the shareholders are only liable for the company’s debts to the value of the money they invested in the company). And as a consequence joint-stock companies are commonly known as corporations or limited companies. Different Ways of the Winding up of the Joint Stock Company: Winding Up of A Company:
The company is created by law, when the legal existence of a company abolishes it is called the winding up of a company. Following are the various kinds or methods of winding up the company:
1. Compulsory winding up by the court 2. Voluntary winding up i. Members Voluntary Winding up ii.
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1. Compulsory Winding Up By the Court: Under the following circumstances a court can wind up the company:
1. If a special resolution has been passed to wind it up by the court. 2. If the company is unable to pay its debts. 3. If company fails to submit the statutory report to registrar. 4. If statutory meeting is not held during a specified period. 5. If a company fails to start the business within one year of the date of incorporation. 6. If a company postpones its business for a one year. 7. If the number of members falls below than two in case of private and below than seven in case of public limited company. 8. A court can wind up the company on any reasonable ground.
2. Voluntary Winding Up:
i. Members Voluntary Winding up: The members of the company can wind up the company voluntarily. The voluntary winding up can take place under the following circumstances:
1. Expiry of period: A company may be wind up voluntarily after the expiry of a period by passing a resolution in the general meeting.
2. Statutory declaration: The majority of the directors make statutory declaration to registrar that the company will be able to pay its debts in full within three years.
3. Special resolution: After submitting the statutory declaration to the registrar, the company in the general meeting passes the ordinary or special resolution to wind up the company.
4. Appointment of liquidators: In the general meeting shareholders of the company appoint the liquidator to wind up the affairs of the company. Assets of the company are also distributed by the liquidator. After the appointment all the powers of the directors and officers cease. The shareholders also fix the remuneration of the liquidator.
5. Final meeting: After winding up the affairs of the company, liquidator calls the general meeting of the shareholders. The full account of the company is placed in the meeting by the liquidators.
6. Dissolution: Within one week of the meeting, liquidator sends the copy of full accounts to the registrar. He also sends other important documents to registrar. The company shall be dissolved on the expiration of three months on the receipt of the copy of accounts and other documents.
ii. Creditors Voluntary Winding Up: In case of creditors voluntary winding up there is no need to submit statutory declaration to registrar. A company can be dissolved by adopting the following methods:
1. Special resolution: In the general meeting of the company special resolution is passed by the shareholders, to wind up the company.
2. Creditors meeting: A meeting of the creditors must be called by the company on the same day or on the next day. A notice of the meeting should be sent to each creditor.
3. Statement of company affairs: In the meeting of the creditors directors of the company should intimate the names, addresses and claims of the creditors. One of the directors presides the meeting of the creditors.
4. Intimation to registrar: Within ten years after the date of creditors meeting, a copy of resolution passed should be sent to registrar.
5. Appointment of liquidator: The creditors and shareholders will nominate any person as a liquidator in their respective meeting. The opinion of the creditors is preferred.
6. Inspection committee: The creditors and shareholders can appoint the inspection committee consisting of five members in each case.
7. Remuneration of liquidators: It is fixed by the inspection committee or by the creditors. The duties and powers of the liquidators are also sanctioned by the inspection committee or creditors.
8. Final meeting: The liquidator calls the meeting of the creditors and paces before them the full account of the company assets.
9. Dissolution: Within one week after the date of meeting liquidator sends the copy of account and other documents to registrar. Registrar will register the documents. After three months from the date of registration a company will be dissolved.
3. Winding Up Under the Supervision of A Court: Sometimes if Court feels necessary it may issue the order to dissolve the company under its own supervision. Dissolution of a company can take place under the supervision of a court under the following conditions.
1. If a liquidator is partial. 2. If the rules for winding up are not observed strictly. 3. If the winding up resolution is obtained by fraud. 4. If the liquidator is not taking keen interest.
Winding Up Process in Bangladesh: Winding Up by the Court: i. The Company or any creditor or creditors or the Registrar submits petition to the court for Winding up of the company by the court. ii. Winding up of a company by the court is deemed to commence at the time of presentation of the petition for the Winding Up. iii. The petitioner/the company files with the Registrar a copy of the Court order within thirty (30) days of the court order. iv. The Registrar notifies in the official gazette that such a court order has been made. v. The court may, at any time after an order for Winding up, in consideration of an application of any creditor or contributor, make an order staying the Winding up proceedings either altogether or for limited time. vi. The court may appoint other than the official receiver a person or persons as official liquidator or liquidators for the purpose of conducting the proceedings of winding up. vii. The official liquidator files with the Registrar audited accounts. viii. When the affairs of the company is completely wound up the official liquidator files with the Registrar court order of dissolution within fifteen (15) days of such an order.
Voluntary Winding Up: i. A company may adopt resolution, special resolution or extraordinary resolution for Voluntary Winding up. ii. A Voluntary Winding up is deemed to commence at the time of passing of the resolution. iii. The company within ten (10) days of resolution notifies in the official gazette and in newspaper that such a resolution has been taken. iv. Members Voluntary Winding up: In this case, prior to passing of the resolution of Voluntary Winding up, the directors at a meeting make a declaration of solvency that the company is capable to pay its debts within a period not exceeding three (3) years. The declaration is filed with the Registrar. v. Creditors Voluntary Winding up: In this case, a declaration to pay debts is not made. vi. The company shall appoint one or more liquidators.
vii. As soon as the affairs of the company are fully wound up and final meeting held, the liquidator within one (1) week of the meeting files with the Registrar final accounts and returns of the final meeting. viii. The company shall be deemed to be dissolved on expiration of three (3) months of registration of returns of the final meeting. ix. The dissolution period may however be extended by the court on consideration of any petition. Winding up subject to supervision of court:
At any stage of the Voluntary Winding up process, the court may make an order, on consideration of a petition by the member (s) or the creditor (s), that the Voluntary Winding up shall continue but subject to supervision of the court.