Quick Answer: What is the difference between voluntary winding up and compulsory winding up?

What is a compulsory winding up?

Compulsory winding up takes place when a creditor of an insolvent company asks the court for a wind up. If the company goes into liquidation, the court of law appoints a liquidator for the liquidation. … After the name is struck off, the company ceases to exist anymore.

What is a voluntary winding up?

A voluntary liquidation is a self-imposed wind-up and dissolution of a company that has been approved by its shareholders. Such a decision will happen once a company’s leadership decides that the company has no reason to continue operating. It is not ordered by a court (not compulsory).

What is creditors voluntary winding up and compulsory winding up?

Creditors Voluntary Liquidation is an insolvent company Creditors Winding Up procedure voluntarily started by the company directors. … Compulsory Liquidation is an insolvent Creditors Winding Up procedure which is generally initiated by company creditors (those who are owed money by the company).

What is the difference between winding up and insolvency?

During winding up proceeding, the property is vested in the Company. In insolvency proceedings, the assets of person are vested in Official Receiver. After completion of proceedings, the Company is dissolved. After completion of proceedings, the insolvent person is discharged from liabilities.

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What are the two most important reasons for compulsory winding up?

The circumstances in which that might occur are discussed below, but generally include where there is a special resolution by the organisation to do so, there is a breakdown or failure in management of the organisation, or where the organisation has become defunct, or never started operating.

What is the difference between compulsory and voluntary liquidation?

There are two types of liquidation: compulsory and voluntary. The main difference between the two is how the insolvency proceedings come about. As the names suggest, one way is voluntary, the other is compulsory and forced upon the company.

Which section provide for compulsory winding up?

According to Section 272 by the Companies Act, 2013 the following individuals have the authority to file for a compulsory winding up procedure under Companies Act.

What is voluntary winding up and its effects?

In the case of a voluntary winding up, the company shall from the commencement of the winding up cease to carry on its business except as far as required for the beneficial winding up of its business: Provided that the corporate state and corporate powers of the company shall continue until it is dissolved.

What is compulsory liquidation?

What is compulsory liquidation? This is an insolvency procedure that applies to companies (and partnerships) and is started by a court order – a winding-up order. A winding-up petition is presented in the High Court, normally by a creditor, stating that the company owes a sum of money and that the company cannot pay.

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What are the different types of winding up?

They are:

  • Compulsory Winding Up under the order of the Court.
  • Voluntary Winding Up, which itself is of two kinds: Members’ Voluntary Winding Up. Creditor’s Voluntary Winding Up.

What are the grounds for compulsory winding up of a company?

Grounds for Compulsory Winding-up (Sec. 433):

  • A company may be wound-up by the Court under the following cases:
  • (i) Special Resolution of the Company:
  • (ii) Default:
  • (iii) Not commencing or suspending the Company:
  • (iv) Reduction of Members:
  • (v) Inability to pay Debts:
  • (vi) The Just and Equitable Clause: