Procedure of Member’s Voluntary Winding Up under Co Act 1956

Procedure of Member’s Voluntary Winding Up under the Companies Act, 1956

A Members’ Voluntary Winding Up is a mode of voluntary liquidation initiated by the members (shareholders) of a solvent company — that is, a company capable of paying its debts in full within a specified period. This procedure is governed by Sections 484 to 498 of the Companies Act, 1956 and the Companies (Court) Rules, 1959. The process begins when the company’s members pass a special resolution for winding up after a declaration of solvency is made by its directors.

Pre-Requisites for Members’ Voluntary Winding Up

Before initiating the winding up process, the following conditions must be satisfied.  The company must be solvent — i.e., able to pay its debts in full within a period not exceeding three years from the commencement of winding up. The Board of Directors must make a Declaration of Solvency in the prescribed form. The Auditor’s Report and Statement of Assets and Liabilities must support the declaration.

Step-by-Step Procedure for Members’ Voluntary Winding Up

Step-1: Convene a Board Meeting 

• Call a meeting of the Board of Directors to Consider the proposal for winding up. Approve the Declaration of Solvency. & Fix the date, time, and venue of the General Meeting to pass the resolution for winding up. The majority of directors must sign the declaration after making a full inquiry into the company’s affairs.

Step-2: Declaration of Solvency

• The Declaration of Solvency must be made in Form No. 149 as per Section 488(1) of the Act. It must include a statement that:

  • The company has made a full inquiry into its financial affairs, and

  • It has formed the opinion that it will be able to pay its debts in full within three years.

• The declaration must be verified by an affidavit signed by the directors. It must be accompanied by:

  1. Auditor’s Report on the company’s accounts.

  2. Statement of Assets and Liabilities, duly attested by a director.

• The declaration must be made within five weeks before passing the resolution for winding up and filed with the Registrar of Companies (ROC) before the resolution is passed.

Step-3: Convene a General Meeting of Members

• Issue clear notice to all members calling a General Meeting. In the meeting Pass a Special Resolution for the voluntary winding up of the company under Section 484(1)(b). Appoint a Liquidator to conduct the winding-up process and determine their remuneration. Fix the time within which the company’s debts are to be paid (if applicable).

Step-4: Filing and Publication of Resolution

• The company must File a certified copy of the special resolution with the Registrar within 30 days of passing it (Section 192). Publish the resolution in the Official Gazette and in one newspaper circulating in the district where the registered office of the company is located, within 14 days of passing the resolution.

Step-5: Appointment of Liquidator

• The members appoint the Liquidator in the same meeting where the winding-up resolution is passed. The appointment must be Notified to the Registrar in Form No. 151, and Published in the Official Gazette and one local newspaper. Once appointed, all powers of the Board of Directors cease, except where the Liquidator or the members authorize otherwise.

Step-6: Registration of Appointment by the Registrar

• Upon receiving Form No. 151, the Registrar registers the appointment and issues confirmation in Form No. 152.

Step-7: Conduct of Liquidation by the Liquidator

• The Liquidator takes control of All company assets and records. Realization of assets and settlement of liabilities. The Liquidator must prepare statements of account, maintain records, and distribute any surplus to members after debts are paid.

Step-8: Annual General Meeting During Liquidation

• If the winding up continues for more than one year The Liquidator must convene a General Meeting of members at the end of each year. He must present an account of his acts and dealings and the position of winding up. File a statement of accounts in Form No. 153 with the Registrar and the Official Liquidator.

Step-9: Completion of Winding Up and Final Meeting

• When the company’s affairs are fully wound up, the Liquidator must  Prepare Final Accounts showing how the winding up has been conducted and the property disposed of Call a Final General Meeting of members. Publish notice of the final meeting in the Official Gazette and one local newspaper at least 7 days before the meeting, using Form No. 155.  Present the final accounts at the meeting.

Step-10: Filing of Final Returns and Dissolution

• Within one week after the final meeting The Liquidator must send to the Registrar and the Official Liquidator A copy of the accounts, and A return of the holding of the meeting, in Form No. 156. The Registrar, on receiving the return, registers it and the company is deemed dissolved from the date of registration of the return.

Summary of Statutory Forms

• Section 484 – Circumstances in which a company may be wound up voluntarily.

• Under Section 488 – Declaration of solvency in case of members’ voluntary winding up.

• Section 491 – Appointment of company liquidator and fixing of remuneration.

• Under Section 509 – Final meeting and dissolution.

• Section 551 – Annual statement by the liquidator.

Conclusion

A Members’ Voluntary Winding Up is a structured legal process ensuring an orderly closure of a solvent company. It provides a transparent mechanism for Settling all liabilities, Realizing assets, and Distributing surplus to members under the supervision of a Liquidator and Registrar. Proper compliance with statutory filings, timelines, and publication requirements under the Companies Act, 1956 is essential to ensure the winding-up process is legally valid and binding. following are Summary of Procedure for Members’ Voluntary Winding Up  the Companies Act, 1956. 

• Board Meeting: Convene to make a declaration of solvency by the majority of directors.
• Declaration of Solvency: Must be in Form No. 149 and comply with Section 488(1).
• Timing: Declaration must be made within 5 weeks before passing the resolution and filed with the Registrar.
• Supporting Documents: Include auditor’s report and statement of assets & liabilities.
• Notice Period: Provide clear notice before passing the resolution.
• Special Resolution: Pass under Section 484.
• Publication: Advertise the resolution in the Official Gazette and a local newspaper within 14 days.
• Registrar Filing: Submit the resolution to the Registrar.
• Liquidator Appointment: Notify and publish appointment; file Form No. 151.
• Registrar Registration: Publication and registration using Form No. 152.
• Annual Meetings: Liquidator must call general meetings annually unless final meeting occurs earlier.
• Statement Filing: If winding up exceeds one year, file annual statements using Form No. 153.
• Final Meeting Notice: Publish notice using Form No. 155 at least 7 days before the meeting.
• Final Accounts Filing: Submit final accounts using Form No. 156.