WINDING-UP OF BANKING COMPANIESWINDING-UP OF BANKING COMPANIES

SYNOPSISSYNOPSIS Introduction Meaning Kinds Winding up by the High court under S.38 Voluntary winding up under S.44(1) Winding up under the supervision of the Court S.44(2) Proceeding of winding up Appointment of liquidator Preliminary report and notice to preferential claimant Powers of liquidator Duties of liquidator Preferential payment to depositors Conclusion

INTRODUCTIONINTRODUCTION S.425 of the Companies Act, 1956, deals with the winding up of

companies.

S.38-44 of the Banking Regulation Act 1949, makes provisions for winding –up of Banking Companies.

During the process of winding up, the assets of the company are sold and all the debts of the company are paid off.

An administrator, called the liquidator, is appointed to take control of the winding up process of the company.

Winding up is the prior stage and dissolution is next.

MEANINGMEANING

A legal procedure to dissolve the company and put an end to its life.

The company ceases to be a 'going concern'.

Defined as: ‘The process by which the life of a company is ended & its property is administered for the benefit of its members and creditors.’

KINDS

Winding up by High Court Winding up by High Court (S.38)(S.38)

High Court shall order the winding up of banking company on following grounds:

Application by RBI Application by RBI

The RBI may file an application for winding up of a Banking Company on the followings grounds:

Failure to comply with the requirement specified under S.11.

Failure to obtain Business License. Violation of any provision of the RBI Act. Any business prejudicial to the interest of its depositors. On receiving information that any bank is unable to pay

debt.

Voluntary winding-upVoluntary winding-up

Voluntary winding up can take place on the following grounds:

The company and the creditors settle their affairs without going to the court.

When the RBI certifies in writing that the company is unable to pay its debts to its creditors as they accrue.

Winding up under the Winding up under the supervision of the Court supervision of the Court S.44(2)S.44(2)

In any case where a banking company is being wound up voluntarily, the High Court makes an order that the voluntary winding up shall continue but subject to the supervision of the Court.

PROCEEDING OF WINDING- UPPROCEEDING OF WINDING- UP

Appointment of Court LiquidatorAppointment of Court Liquidator

Competency.

Official liquidator appointed by Central government.

All provisions of companies Act, 1956 relating to a liquidator.

PRELIMINARY REPORT AND NOTICE PRELIMINARY REPORT AND NOTICE TO PREFERENTIAL CLAIMANTS BY TO PREFERENTIAL CLAIMANTS BY LIQUIDATORLIQUIDATOR

Preliminary report to be submitted to the High Court within two months from the date of winding up order.

Liquidator shall send notice to a claimants and secured creditor within fifteen days from winding up order.

POWERS OF LIQUIDATORPOWERS OF LIQUIDATOR Powers to be exercised by sanction of Court. Can institute and defend suits as well as

proceedings in the name and on behalf of the company.

Carry on business for the beneficial winding up. Sell movable or immovable property by public

action or private contract. Do all other acts necessary to wind up and to

distribute assets.

Powers without obtaining the Powers without obtaining the sanction of Courtsanction of Court To do all acts and to execute all deeds, receipts

and documents in the name and on behalf of company and to use common seal of the company for that purpose.

To inspect the records and returns of company. To prove, rank and claim in the insolvency of

any company. To draw, accept, make and endorse any

negotiable instruments in the name and on behalf of the company.                 

DUTIES OF LIQUIDATORDUTIES OF LIQUIDATOR

To submit preliminary report. To take over companies assets. To convene meetings of creditors and

contributories. To keep proper books. To submit accounts. To submit information in pending liquidation.

PREFERENTIAL PAYMENT TO PREFERENTIAL PAYMENT TO DEPOSITORSDEPOSITORS

As per S.530 of the Companies Act, 1960 preferential payments to the depositors shall be paid as follows:

To every depositors in the savings bank account of the banking company a sum of Rs.250 or the balance at his credit, whichever is less

To every other depositors of the banking company

a sum of Rs.250 or the balance at his credit whichever is less

To general creditor

ConclusionConclusion

Winding-up procedure takes place in respect of banking companies as per the methods discussed so far.

Every banking company must competent enough to pay all its debts and other liabilities in order to carry on its business.

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