Procedure for Creditors’ Voluntary Winding-up

The procedure in a creditors’ voluntary winding-up is based upon the assumption that the company is insolvent. Meeting of the creditors is required to be held in addition to those. of the members almost from the beginning of the process of the voluntary winding-up. The chief power to appoint the liquidator in case of a creditors’ voluntary winding up arising out of insolvency of the company, is in the hands of the creditors and there is also a provision for the appointment of a Committee of Inspection, if desired, to which is left the fixing of the liquidator’s remuneration. The detailed provisions as contained in Sections 500 to 509 are given below:

1. Meeting of Creditors [Section 5001. When no statutory declaration of solvency has been made and filed as required by the Act, the Board of Directors, acting on behalf of the company must summon a meeting of the creditors, on the same day or the next day after the meeting at which the resolution for voluntary winding-up is to be proposed. Notices of the meeting have to be sent by post to the creditors simultaneously with the sending of the notices of the meeting to the members for the meeting of the members. Notice of the meeting should also be advertised in the Official Gazette and in at least two newspapers circulating in the district of the registered office or principal place of business of the company.

The Board of Directors must prepare and lay before the meeting statement of the position of the company’s affairs, together with a list of its creditors and the estimated amounts of their claims. The meeting is to be chaired by one of the Directors of the company. Violation of Section 500 is punishable with fine which may extend to to,OOO. rupees leviable on the defaulting Director(s) and/or the company in calling the meeting.