WINDING UP IN COMPANY LAW (PART 2)
Appointment: The tribunal shall also appoint a provisional liquidator or a company liquidator at the time of passing an order for winding up of the company. This liquidator shall be appointed by a panel maintained by the Central Government consisting of the names of chartered accountants, advocates, company secretaries, cost accountants or firms or bodies corporate having such chartered accountants, advocates, company secretaries, cost accountants and such other professionals as could also be notified by the Central Government or from a firm or a body corporate of persons having a mixture of such professionals as could also be prescribed and having a minimum of ten years’ experience in company matters.
• The terms and conditions of appointment of a provisional liquidator or Company Liquidator and the fee payable to him or it shall be specified by the Tribunal on basis of task required to be performed, experience, qualification of such liquidator and size of company.
• The liquidator shall file a declaration within seven days from the date of appointment in the prescribed form disclosing conflict of interest or lack of independence in respect of his appointment
• Removal : The Tribunal may, on a reasonable cause being shown and for reasons to be recorded in writing, remove the provisional liquidator or the Company Liquidator on the following:- (a) misconduct; (b)fraud or misfeasance; (c) professional incompetence or failure to exercise ordinary care and diligence in performance of the powers and functions; (d) inability to act as provisional liquidator or because the case could also be , Company Liquidator; (e) conflict of interest or lack of independence during the term of his appointment that might justify removal.
• In case of Death, resignation or removal: – The work of the previous liquidator shall be assigned to another company liquidator.
• Where the Tribunal is of the opinion that any liquidator is responsible for causing any loss or damage to the company due to fraud or misfeasance or failure to exercise ordinary care and diligence within the performance of his or its powers and functions, the Tribunal may recover or cause to be recovered such loss or damage from the liquidator and pass such other orders because it might imagine fit.
• A reasonable opportunity of hearing shall be provided to the tribunal before passing any order.
• Appointment of provisional liquidator: Once the tribunal appoints a provisional liquidator or passes an order for winding up, the tribunal within 7 days from the date of passing such order, shall intimate an equivalent to the liquidator and therefore the registrar.
• Duty of registrar: The registrar has the duty to endorse and notify about the order of appointment of provisional liquidator in the official gazette. If the corporate may be a listed company, then the registrar has got to notify it within the stock market where the securities of the corporate are listed.
Winding up committee: Within 3 weeks of such order of winding up, the liquidator shall also make an application to the tribunal to constitute a Winding up committee to assist and monitor the process of liquidation. The committee shall consist of (i) Official Liquidator attached to the Tribunal (ii) nominee of secured creditors (iii) a professional nominated by the Tribunal.
• The Company Liquidator thus appointed, shall be the convener of the meetings of the winding up committee which shall assist and monitor the liquidation proceedings in following areas of liquidation functions:- (i) taking over assets; (ii) examination of the statement of affairs; (iii) recovery of property, cash or any other assets of the company including benefits derived therefrom; (iv) review of audit reports and accounts of the company; (v) sale of assets; (vi) finalization of list of creditors and contributories; (vii) compromise, abandonment and settlement of claims; (viii) payment of dividends, if any; (ix) any other function, as the Tribunal may direct from time to time.
• The company liquidator shall place before the Tribunal a report along with minutes of the meetings of the committee on monthly basis duly signed by the members present at the meeting. The Company Liquidator shall prepare the draft final report for consideration. The final report approved by the winding up committee shall be submitted by the company liquidator to the tribunal.
• The liquidator has to submit a report to the tribunal within 60 days of passing of order of winding up. The report must consist of particulars such as the nature and details of the assets of the company, valuation of the assets, amount of capital issues etc. The liquidator can also need to make a report on the feasibility of the commercial aspects of the corporate and make any longer reports as he deems fit.
Effect of completing order: No suit or other proceeding shall be commenced, or if pending at the date of the completing order, shall be proceeded with, by or against the company, except with the leave of the Tribunal and subject to such terms as the Tribunal shall specify. The promoters, directors, officers and employees, who are or are employed of the corporate or acting or related to the corporate shall extend full cooperation to the Company Liquidator in discharge of his functions and duties and is t hey don’t do so shall be punishable with imprisonment which may extend to six months or with fine which may reach fifty thousand rupees, or with both. (Section 284).
While passing the order of completing , the tribunal shall pass an order to line up an advisory committee to advice the liquidator and report back to the tribunal as directed. It shall contains 12 members of which are shareholders, contributories and creditors of the corporate . The company liquidator shall convene a gathering of creditors and contributories of the corporate within 30 days from the date of order of completing in order that the tribunal can decide the composition of the committee. This committee shall be headed by the Company Liquidator(Section 287).
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