WINDING-UP OF BANKING COMPANIES

SYNOPSIS

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

INTRODUCTION

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.

MEANING

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 under S.38

Voluntary winding up

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

Winding up by High Court (S.38)

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

Company unable pay its

debt

Application by RBI under S.37

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-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 supervision of the Court 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- UP

Appointment of Court Liquidator

PRELIMINARY REPORT AND NOTICE TO PREFERENTIAL CLAIMANTS BY LIQUIDATOR

Appointment of Court Liquidator

Competency. Official liquidator government. appointed by Central

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

PRELIMINARY REPORT AND NOTICE TO PREFERENTIAL CLAIMANTS BY LIQUIDATOR

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 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 sanction 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 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 DEPOSITORS

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

Conclusion

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.

THANK YOU!