Compulsory Winding Up ⚖️
Recap: Compulsory Winding Up = Winding Up by Tribunal (NCLT orders it).
This lesson focuses on comparing Compulsory vs Voluntary winding up.
Key Differences: Compulsory vs Voluntary 🆚
| Feature | Compulsory (by Tribunal) | Voluntary (MVL/CVL) |
|---|---|---|
| Who Initiates | Court (NCLT) | Company (Shareholders/Creditors) |
| Court Involvement | Full (Court-supervised) | Minimal (only for dissolution order) |
| Liquidator | Official Liquidator (appointed by Tribunal) | Appointed by shareholders/creditors |
| Speed | Slower (court procedures) | Faster (no court hearings) |
| Cost | Higher (court fees, legal costs) | Lower |
| Flexibility | Less (court rules) | More (company decides process) |
| Stigma | High (forced closure) | Lower (voluntary choice) |
| When Used | Fraud, insolvency (unwilling), deadlock | Solvent closure, willing insolvency |
When is Compulsory Winding Up Appropriate? 🎯
Best for:
- Fraud/Misconduct: Court ensures fair investigation.
- Disputes: Shareholders/creditors fighting. Need neutral authority.
- Default: Company failed legal obligations (5 years no returns).
- Unwilling Debtor: Company refuses to acknowledge insolvency.
Example: Satyam Computers (2009 fraud case) - Court had to step in to protect stakeholders.
Winding Up Commencement Date 📅
Compulsory:
- Date of petition filing (or earlier if court decides).
- Effect: All transactions after this date can be VOID (if prejudicial to creditors).
Voluntary:
- Date of Special Resolution passing.
Why it Matters:
- Transactions just before winding up are scrutinized.
- If director sold assets cheap to a friend 1 day before winding up, liquidator can reverse it!
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Quiz Time! 🎯
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💡 Final Wisdom: "Compulsory = Court's rod. Voluntary = Company's choice. Both lead to the same end: dissolution!" 🏁
Next up: Consequences of Winding Up - What happens to company, shareholders, employees? 💥