B.com(H/P) | CH-13 Winding Up | Company Law | Sem 2nd |Sol Du NEP| Winding Up | Power of Tribunal

Welcome Back and New Year Greetings

Introduction

• The speaker welcomes viewers back to the channel, expressing gratitude for their continued viewership.

• Acknowledges that the video is released before exams, apologizing to those who may watch it later due to not subscribing.

Exam Preparation and Resources

Importance of Subscription

• Encourages viewers to subscribe to the channel "Vivek Mr. Economics" for timely updates and resources related to exam preparation.

Note Purchase Offer

• Mentions availability of notes for purchase, emphasizing urgency due to upcoming exams.

Understanding Winding Up of Companies

Definition of Winding Up

• Defines winding up as the complete closure of a company, indicating that it will no longer operate in any capacity.

Legal Perspective

• Discusses winding up under specific acts such as the Liquidation Act and Insolvency and Bankruptcy Act 2016.

Difference Between Winding Up and Dissolution

Key Distinctions

• Clarifies that winding up refers to ceasing operations legally while assets may still exist; dissolution means complete destruction or replacement by another entity.

Process Overview

• Explains that winding up is a preliminary stage leading to dissolution where transactions are halted but legal existence remains until final dissolution occurs.

Modes of Winding Up

Methods for Closure

• Outlines two primary methods:

• Tribunal-directed winding up due to fraud or misconduct.

• Liquidation when a company cannot generate profit or maintain liquidity.

Circumstances Leading to Tribunal Action

What is Security of State?

Understanding the Concept

• The term "Security of State" refers to actions taken by a company that may harm the country or region, particularly through transactions with foreign entities.

• Companies engaging in transactions with countries considered adversaries (e.g., India and Pakistan) can be scrutinized for their impact on national security.

• If a company's activities are deemed detrimental to state security, it can be ordered to wind up operations by the court.

Financial Statements and Company Closure

• A company failing to prepare financial statements or consistently reporting losses may face closure as per legal provisions.

• Courts can intervene if a company attempts fraud, leading to potential winding up orders.

Who Can Petition for Winding Up?

Eligible Petitioners

• Various parties can petition for a company's winding up:

• The company itself if it recognizes its inability to continue operations due to losses.

• The Central Government if it identifies harmful activities within the company affecting national interests.

• Tribunals like NCLT (National Company Law Tribunal), which can also initiate winding-up proceedings based on their assessments.

Registrar's Role

• The Registrar has the authority to file petitions for winding up but must notify the company within 60 days regarding the reasons for such action.

Powers of Tribunals Regarding Company Closure

Tribunal Authority

• Tribunals have significant powers, including dismissing winding-up petitions and appointing provisional liquidators who manage companies facing insolvency.

• Upon filing a petition, tribunals have 19 days to act on appointments related to managing or closing down companies.

Provisions Under Insolvency and Bankruptcy Code 2016

Key Provisions

• The Insolvency and Bankruptcy Code (IBC) of 2016 outlines specific procedures for winding up companies, emphasizing new regulations that could significantly affect corporate practices.

• This code is crucial as it introduces updated frameworks aimed at addressing insolvency issues effectively.

Provision for Winding Up: Key Insights

Introduction to the Topic

• The speaker expresses a relaxed mindset on New Year's Day, indicating no major issues but feeling mentally fatigued.

• The discussion begins with "Provision for Winding Up," emphasizing its importance under the Insolvency and Bankruptcy Code of 2016.

Understanding Insolvency and Liquidation

• Companies seeking to close down due to insolvency or financial difficulties can initiate liquidation under this code.

• A minimum requirement for cases is set at ₹1 lakh; companies must owe this amount or more to creditors to qualify for winding up.

Steps in the Winding-Up Process

• Initiating a board meeting is crucial where resolutions are passed regarding the company's closure.

• Assets and liabilities must be sold transparently, ensuring no fraudulent activities occur during this process.

Filing Requirements

• After passing resolutions, all reports related to asset sales and creditor payments must be filed with the Registrar of Companies.

• A general meeting is convened four weeks later, where a professional liquidator may be appointed to assist in managing assets and liabilities.

Approval from Creditors

• Creditor approval is necessary; if debts exceed ₹80,000, negotiations may allow reduced payments (e.g., settling for ₹60,000).

• At least two-thirds of creditors must approve any proposed settlement before proceeding with winding up.

Public Announcement and Reporting

• The hired liquidator will make a public announcement within five days about the company’s impending closure.

• Within 30 days, detailed reports will be discussed with members and published on official platforms including company websites.

Role of the Liquidator

• The liquidator's responsibilities include preparing initial reports and maintaining records related to winding up processes.

Liquidator Duties and Responsibilities

Overview of Liquidator's Role

• The liquidator is responsible for managing claims during the winding-up process, ensuring that claimants receive the funds they are entitled to.

• They will verify the legitimacy of claims made by stakeholders, determining if they are entitled to the amounts requested.

Stakeholder Management

• A list of stakeholders will be created, detailing shareholders and their respective accounts for future payments.

• The liquidator must ensure that any proceeds from asset sales are distributed appropriately among creditors and stakeholders.

Completion Timeline

• The entire liquidation process should ideally be completed within one year, including all necessary actions to wind up the company.

• After closing the company, a meeting must be held within 15 days to report on assets and liabilities.

Final Reporting Process

• Preparation of final reports related to the winding-up process is crucial; these reports summarize financial outcomes post-liquidation.

• Final reports must be submitted to directors, legal authorities (NCLT), and stakeholders for approval before filing with regulatory bodies.

Conclusion of Liquidation

• Once approved, final reports lead to formal submission for closure with regulatory authorities, marking the end of the company's operations.