Winding Up of Producer Company

Narendra Kumar

19 Dec, 2020

The main objective of the Producer company is to facilitate the formation of co-operative business as companies and to make it possible to convert the existing co-operative business into companies. The main purpose of winding up of Producer company is to realize the assets and pay the debts of the company expeditiously and fairly in accordance with the law. The objects given under section 581B are as follows:

The objects of the Producer Company will transmit to all or any of the ensuing matters, namely: (as provided in the law)

• Production, harvesting, procurement, grading, pooling, handling, marketing, selling, the export of primary production of the Members or import of goods or services for their benefit, provided that the Producer Company may transmit on any of the activities stated in this section either by itself or through other institution.
• Processing including preserving, drying, distilling, brewing, venting, canning, and packaging of the produce of its Members.
• Manufacture, sale or supply of machinery, equipment or consumables mainly to its Members.
• Providing education on the mutual assistance principles, to its Members and others.
• Rendering technical services, consultancy services, training, research and development, and all other activities for the promotion of the interests of its Members.
• Generation, transmission, and distribution of power, revitalization of land and water resources, their use, conservation and communication relatable to the primary producer.
• Insurance of producers or their primary produce.
• Promoting techniques of mutuality and mutual assistance.
• Welfare measures or facilities for the benefit of Members as may be decided by the Board.
• Any other activity, ancillary or incidental to any of the activities referred to in clauses above or other activities which may promote the principles of mutuality and mutual assistance amongst the Members in any other manner.
• Financing of procurement, processing, marketing or other activities specified in clauses above which include extending of credit facilities or any other financial services^[1] to its Members.

Winding-up of a company is a process of putting an end to the life of a company by shutting or closing down the company. It is a proceeding by means of which a company is dissolved and in the course of such dissolution its assets are collected, its debts are paid off out of the assets of the business or from assistance by its members, is essential. If any excess is left, it is dispersed amongst the members in accordance with their rights.

Modes of Winding up of Producer Company

• Compulsory winding up or Winding up by Tribunal
• Voluntary winding up of companies
• Member’s Voluntary winding up
• Creditor’s Voluntary winding up

Grounds on which a Company may be wound up by the Tribunal

• If the company has, by special resolution, resolved that the company be wound up by the Tribunal
• If the company has acted against the interest of the security of the State and the sovereignty and integrity of India
• If the Tribunal is of the opinion that the affairs of the company have been conducted in a fraudulent/unlawful manner
• If the company has not filed or has made any default in filing of financial statements or annual returns with the Registrar for immediately preceding 5 consecutive financial years
• if the Tribunal is of the opinion that it is just and equitable that the company should be wound up

Grounds on which a Company may be wound up voluntarily

 If the company passes a resolution for winding up of the Company

• If the period fixed for the duration of the company by the articles has expired

Procedure for Winding up of Producer Company by Tribunal

1. The petition has to be filed by the creditor to the tribunal for the winding up of a company in Form No. NCLT. 1 and any attachments have to be accompanied in Form No. NCLT. 2 which has to be verified by an affidavit in Form No. NCLT. 6
2. The tribunal on receiving of such appeal & application for winding up will pass an order, within 90 days from the date of presentation of the petition.
3. The tribunal can also dismiss the application by giving notice in Form No. NCLT. 5 to the opposite party before appointing a provisional liquidator.
4. If the tribunal is satisfied that it is a prima facie case for winding up, the tribunal shall pass an order to direct the company which is bound to be wound up, to files its objections along with a statement of affairs within 30 days of the order. The tribunal may grant an extension of 30 days in special circumstances.
5. The directors and other officers of the company have to submit the completed and audited books of accounts of the company within 30 days of such order being passed by the tribunal.
6. The tribunal shall appoint a provisional liquidator or a company liquidator at the time of passing an order for winding up of the company and such liquidator shall file a declaration within 7 days from the date of appointment about any conflict of interest or lack of independence in respect of his appointment.
7. The tribunal may appoint the provisional liquidator as the company liquidator for the conduct of proceedings for the winding up of a company and the liquidator so appointed can also be removed and replaced for reasons of misconduct or fraud.
8. After 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, intimate the same to the liquidator and the registrar.
9. Then the registrar shall endorse the same and notify about the order in the official gazette.
10. Within three weeks of such summon of winding up, the Company liquidator will make a request to the tribunal to establish a Winding-up Committee for assistance & monitor the procedure of liquidation.
11. Winding Up Committee shall submit the final report to the tribunal
12. No other legal suit or proceeding can commence against the company once an order for winding up has been passed by the tribunal.
13. The Company liquidator has to submit a report to the tribunal within 60 days of the passing of the order of winding up and the report must consist of particulars as mentioned in the section.
14. After properly scrutinizing the report by the company liquidator, the tribunal shall fix a time within which the entire proceedings shall be completed and the company shall be dissolved.
15. The tribunal may also order the sale of the company and sale committee may be appointed to assist the company liquidator in this matter
16. Once the order of winding up has been passed, the company liquidator shall take into his control and custody all the property, effects or actionable claims to which the company is entitled and the tribunal shall pass an order to set up an advisory committee to advise the liquidator and report to the tribunal
17. The liquidator has to maintain proper books of accounts which shall be audited by the tribunal
18. The tribunal may call the contributors to pay to the extent of their liabilities or to set-off.
19. The tribunal has to examine the directors and promoters if any fraud has been reported by the company liquidator
20. Once the affairs of the company have been completely wound up, the company liquidator shall make an application to the Tribunal for dissolution of such company and within 30 days, a copy of the order has to be sent to the registrar by the company liquidator and the same shall be recorded in the register by the registrar

Procedure for Voluntary Winding up of the Company

1. Conduct a Board Meeting by passing a resolution consisting of a declaration by the directors that they are of the opinion that company has no debt or it will be able to pay its debt after using all the profits from the sale of its assets.
2. Circulating the notice for calling a General Meeting proposing the resolution along with the explanatory statement.
3. In the General Meeting, pass the ordinary resolution for winding up by the ordinary majority or special resolution by 3/4th majority & the winding up will start from the date of passing the resolution.
4. After passing the resolution conduct a meeting of creditors, if the majority in value of creditors is of the opinion that winding up is beneficial for all the parties.
5. Within ten days of the passing of the resolution for winding up of the company, file a notice with the Registrar for the appointment of a liquidator.
6. Give notice of the resolution in the Official Gazette and also advertise in the newspaper within 14 days of the passing of the resolution for winding of the company.
7. Within 30 days of General Meeting for winding up of the company, file certified copies of the ordinary or special resolution passed in the General Meeting for winding up of the company.
8. After filing the certified copies of the above resolution, wind up the affairs of the company and prepare the liquidators to account and get the same audited.
9. Conduct a General Meeting of the company.
10. When the affairs of the company are totally wound up and it is about to dissolve, pass a special resolution for the disposal of books and all necessary documents of the company.
11. File a copy of accounts and file an application to the tribunal for passing an order for dissolution of the company, within 15 days of the final general meeting of the company.
12. The tribunal shall pass an order for dissolving the company within 60 days of receiving such application if the tribunal is of the opinion that the accounts are in order and all the necessary compliances have been fulfilled.
13. The appointed liquidator would then file a copy of the order with the registrar.
14. After getting the order approved by the tribunal, the registrar shall publish a notice in the Official Gazette declaring that the company is dissolved.