Assignee of a Contributory (Section 431).

Assignee of a Contributory (Section 431). If a contributory is adjudged insolvent, either before or after he bas been placed on the list of contributories, his assignee in

insolvency shall represent him for all the purposes of the winding-up, and shall be contributories accordingly.

5. Liquidator of a Body Corporate which is a Member (Section 432). If a body corporate which is a contributory is ordered to be wound-up, either before or after it has been placed on the list of contributories, the liquidator of the body corporate shall represent it for all the purposes of the winding up of the company and shall be a contributory accordingly.

6. Subscribers to the Memorandum. Subscribers to the Memorandum are deemed to be members of the company even though their names mayor may not be entered in the Register of members. Accordingly, in the event of winding-up, in spite of the fact that their names are not entered in the Register of members, they shall be deemed as contributories for the amount remaining unpaid on the shares they agreed to subscribe for.

In f.H. Chandler and Co. Ltd., In re (1926) 48 All. 580, a person agreed to purchase shares in a company and subscribed to the Memorandum of Association, but later asked the promoter to cancel his “requirements”. His name was never entered in the register of members. It was held that he was liable as a contributory.

Even allotment of shares is not necessary to create liability On the part of the persons who have subscribed to the Memorandum. [Babulal Vs. Narayana Sugar and General Mills Ltd. (1958) 28 Compo Cas. 155 (Punj.); Universal Transport Company Ltd. Vs. S. fagjit Singh (1958) 26 Compo Cas. 36 (Punj.)].

Persons Liable as Contributories

Present and Past Members. A member of a limited company shall be liable to contribute the amount unpaid on the shares in respect of which he is a contributory, or the amount he has guaranteed to pay in the event of winding up. A past member shall be liable to contribute: (i) if he ceased to be a member within one year before the commencement of winding-up; (ii) the debt liability was contracted or incurred while he was a member; and (iii) the present members fail to meet the liabilities in respect of the debts incurred while he was a member (Section 426).

2. Directors and Manager Whose Liability is Unlimited. In the winding-up of a limited company, any Director or Manager, whether past or present, whose liability is unlimited shall be liable as if he were a member of an unlimited company. But, a contribution from such a person shall require a Court order, and he shall not be liable if he had ceased to hold office for a year or upward before the commencement of the winding-up (Section 427). A past Director or Manager shall not be called upon to make payment as a contributory if the debt or liability of the company was contracted after he ceased to be the Director or Manager, as the case may be.

3. Legal Representatives of a Deceased Member. If a contributory dies either before or after he has been placed on the list of contributories, his legal representatives shall be liable to contribute to the assets of the company in discharge of his liability and are contribu tories accordingly [Section 430(1)]. But they are only liable to contribu te to the extent of the assets, if any, which have come into their hands from the deceased shareholder [Prayan Prasad Vs. Gaya Bank & Traders Assn. Ltd. (1931) 1 Compo Cas. 85].

The expression ‘legal representative’ for the purposes of Section 430 is not confined to the legal representatives of the person primarily interested but also includes the legal representatives of his legal representatives [P.R. Krishnaswami, In re (1947) 17 Compo Cas. 189 (Mad)].

In case shares are held jointly, the interest of the deceased shareholder passes on to the survivor and not to the heir of the deceased. The heir neither becomes a shareholder nor a contributory within the meaning of Section 430, read with Regulation 25 of Table A [Ram Gobind Mishra Vs. Allahabad Theatres Pvt. Ltd. (1986) Tax L.R.

1681 (All.)]. .

Meaning of Contributory

The term’ contributory’ means every person liable to contribute to the assets of a company in the event of its being wound-up, and includes the holder of any shares which are fully paid-up [Section 428].

Further, Section 428.makes use of the expression ‘deemed contributories’ which shall include any person alleged to be a contributory.

Contributory vis-a-vis Member

The terms ‘contributory’ and ‘member’ are not interchangeable under Section 428. While every member would become a contributory, the converse would not be true. For instance, a legal representative of a deceased member shall be regarded as contributory but he cannot be regarded as a member until and unless his name is entered in the Register of members [Rajdhani Grains and Jaggery Exchange Ltd., Re [1983]54 Compo Cas. 166].

Distinguish between ‘Members’ Voluntary Winding-up’ and ‘Creditors’

Members’ voluntary winding-up can be resorted to by solvent companies and thus requires the filing of Declaration of Solvency by the Directors of the company with the Registrar. Creditors’ winding-up, on the other hand, is resorted to by insolvent companies.

2. In Members’ 1Toluntary winding-up there is no need to have creditors’ meeting. But, in the case of creditors’ voluntary winding-up, a meeting of the creditors must be called immediately after the meeting of the members.

3. Liquidator, in the case of members’ winding-up, is appointed by the members. But in the case of creditors’ voluntary winding-up, if the members and creditors nominate two different persons as liquidators, creditors’ nominee shall become the liquidator.

4. In the case of Creditor’s voluntary winding-up, if the creditors so wish, a ‘Committee of Inspection’ may be appointed. In the case of Members’ voluntary winding-up, there is no provision for any such Committee.

5. The remuneration of liquidator/(s) is fixed by the members in case of Members’ voluntary winding-up (Section 490) whereas the same is to be fixed by the Committee of Inspection, if any, or by the creditors in case of Creditors’ voluntary winding-up (Section 504).

Final Meeting and Dissolution [Section 5091. As soon as the affairs of the company are fully wound-up, the liquidator shall

Final Meeting and Dissolution [Section 5091. As soon as the affairs of the company are fully wound-up, the liquidator shall

(a) make up an account of the winding-up, showing how the winding-up has

been conducted and the property of the company has been disposed of; and

(b) call a general meeting of the company and a meeting of the creditors for the purpose

of laying the account before the meeting and giving any explanation thereof.

Each such meeting must be called by advertisement and must specify the time, place and objects thereof and must be published at least one month before the meeting in the Official Gazette and also in some newspaper circulating in the district where the registered office of the company is situated.

If the liquidator fails to call a general meeting of the company, as aforesaid, he

shall be punishable with fine which may extend to five thousand rupees.

Within one week after the date of the meeting, the liquidator shall send to the Registrar and the Official Liquidator a copy of the account and a return of the meeting held [Section 509(3)].

If the copy is not so sent or the return is not so made, the liquidator shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues.

The Official Liquidator, after scrutiny of the books and papers of the company,

shall make a report to the Court. If this report states that the affairs of the company

have not been conducted in a manner prejudicial to the interest of the company or public then from the da te of the submission of the report, the company shall be deemed to have been dissolved; otherwise the Court will ask the Official Liquidator to make further investigation and may, after the subsequent report of the Official Liquidator order that the company shall stand dissolved from a specified date or may issue such other order as may be considered appropriate by the Court [Section 509(6)].

Notice by Liquidator of his Appointment [Section 5161.

Notice by Liquidator of his Appointment [Section 5161. The liquidator shall, within 30 days after his appointment, publish in the Official Gazette, and deliver to the Registrar for registration, a notice of his appointment in the prescribed form. In case, he fails to comply with this provision he shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues.*

5. Committee of Inspection [Section 5031. The creditors at their first or any subsequent meeting may, if they think fit, appoint a committee of inspection of not more than five persons. If such committee is appointed, the company may, either at the meeting at which the winding-up resolution is passed, or at a later meeting, appoint not more than five persons to serve on the committee. If the creditors object against any person or persons appointed by the company, then the matter will be referred to the Court for the final decision. The powers of such committee are the same, as those of a committee of inspection appointed in a compulsory winding up**. It may be noted that the provisions of Section 465 enabling the creditors and contributories to appoint persons holding power of attorney to the committee will b.z applicable. Further, no committee of inspection is to be appointed in a voluntary winding-up by members.

6. Fixing of Liquidator’s Remuneration [Section 5041. The remuneration to be paid to the liquidator or liquidators has to be fixed by the committee of inspection or, if there

is no such committee, by the creditors. Where the remuneration is not so fixed, it must be determined by the Court. Any remuneration once fixed shall not be increased in any circumstances whatever, whether with or without sanction of the Court.

7. Board’s Powers to Cease on Appointment of Liquidator [Section 5051. On the appointment of a liquidator, all the powers of the Board of Directors shall cease, except in so far as the committee of inspection, or if there is no such committee, the creditors, in general meeting, may sanction the continuance thereof.

8. Power of the Liquidator to Accept Shares, Policies, etc., as Consideration for the Sale of Property. Section 494 discussed under members’ voluntary winding-up will apply to creditors’ voluntary winding-up also but only subject to the permission to exercise such power being granted either by the Committee of Inspection or by the Court.

9. Duty of Liquidator to Call meeting of Company and of Creditors at the End of Each Year [Section 5081. In the event of the winding-up continuing for more than one year, the liquidator must call a general meeting of the company and a meeting of the creditors at the end of the first year, from the commencement of the winding-up and at the end of each succeeding year, or as soon thereafter as may be convenient within 3 months from the end of the year or such longer period as the Central Government (i.e., the Regional Director), may allow. Further, he shall lay before the meeting an account of his acts and dealing and of the conduct of winding-up during the preceding year, together with a statement in the prescribed form and containing the prescribed particulars with respect to the proceedings, and position of the winding-up. The liquidator is punishable with a sum not exceeding rupees one thousand” in case of each default committed by him, i.e., to call the meetings and/or to lay the statement of accounts.

• As per Companies (Amendment) Act, 2000

Notice to Registrar [Section 501A A copy of any resolution passed at the creditors’ meeting must be filed with the Regtstrar within 10 days of the passing thereof. If default is m.ade, then the compan.y eind every officer in default shall be punishable with fine which may extend to 500 rupees for every day of the default.

3. Appointment of Liquidator [Section ‘Q021. The creditors and the members at their respective first meetings may nominate erson to be the liquidator for the purpose of winding-up the affairs and distributing the assets of the company. If the creditors and the members nominate different persons, the creditors’ nominee will as a rule be the liquidator. But any Director, Member or Creditor may apply to the Court for an order that the company’s nominee or the Official Liquidator or some other person should be appointed. The order of the Court will be binding on all. If no person is nominated by the creditors, the members’ nominee shall be the liquidator. Conversely, if no person is nominated by the members, the nominee of the creditors shall be the liquidator. In a situation where in the members’ meeting a liquidator is to be appointed, the decision of meeting should be based on the majority in number of members and not by the value of shares held’. Vacancies in the office caused by death, resignation or otherwise may be filled by creditors, except where the liquidator was originally appointed by or under the direction of the Court, when the Court will, on application, fill the vacancy.

Body Corporate not to be Appointed as Liquidator (Section 513). A body corporate shall not be qualified for appointment as liquidator of a company in a voluntary winding-up. Any such appointment, if made, shall be void. Further, sub-section (3) of Section 513 provides that any body corporate which acts as liquidator of a company and every Director or a Manaer thereof shall be punishable with fine which may extend to ten thousand rupees.