Voluntary Winding Up 🙋

Definition: Winding up initiated by the company itself (shareholders/creditors), without court order.

Why Voluntary?

• Faster and cheaper than court process.
• Company has control over the process.
• Less stigma than "forced" winding up.

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Types of Voluntary Winding Up 📋

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1. Members' Voluntary Winding Up (MVL) 💰✅

When Used: Company is SOLVENT (Can pay all debts + interest).

Who Initiates: Shareholders.

Requirements:

a) Special Resolution (75% majority) to wind up.

b) Declaration of Solvency (Section 305):

• Majority of directors declare (in writing):
  • Company can pay all debts in full within 3 years.
  • Company is solvent.
• Filed with Registrar within 5 weeks before special resolution.

c) Appointment of Liquidator:

• Shareholders appoint liquidator (at general meeting).

Process:

1. Directors make Declaration of Solvency.
2. Call General Meeting (21 days' notice).
3. Pass Special Resolution to wind up.
4. Appoint Liquidator (Shareholders choose).
5. Liquidator sells assets, pays creditors.
6. Distributes surplus to shareholders (proportionate to shareholding).
7. Final meeting, file dissolution papers.

Example: A real estate company completed building all projects. Sold them. Now has ₹100 Cr cash, zero debt. Shareholders decide to wind up and distribute money.

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2. Creditors' Voluntary Winding Up (CVL) 💸❌

When Used: Company is INSOLVENT (Cannot pay debts).

Who Initiates: Shareholders + Creditors have more power.

Why CVL (instead of Tribunal)?

• Company prefers to avoid court.
• Creditors agree to voluntary process (hope to recover more).
• Faster than court litigation.

Process:

1. Directors CANNOT make Declaration of Solvency (company insolvent).
2. Pass Special Resolution to wind up.
3. Call Creditors' Meeting (on same day or next day as GM).
4. Creditors appoint Liquidator (they have final say, not shareholders).
5. Liquidator sells assets, pays creditors.
6. Usually nothing left for shareholders.

Difference from MVL:

• MVL: Shareholders control. Surplus goes to them.
• CVL: Creditors control. Assets go to pay debts.

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Comparison Table 🆚

Feature	Members' Voluntary	Creditors' Voluntary
Solvency	Solvent	Insolvent
Declaration of Solvency	Required (by directors)	NOT possible
Who appoints Liquidator	Shareholders	Creditors (final say)
Surplus	Goes to shareholders	Usually none (all to creditors)
Example	Profitable company voluntary closure	Failed startup winding up

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Quiz Time! 🎯

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💡 Final Wisdom: "MVL = Rich company retiring gracefully. CVL = Broke company accepting reality before court forces it!" 💰🚪

Next up: Compulsory Winding Up - Detailed comparison! ⚖️