WINDING UP OF UNREGISTERED COMPANIES

Part – II of the Chapter XXI deals with winding up of unregistered companies.

UNREGISTERED COMPANY (EXPLANATION TO SECTION 375):

“unregistered company”—

(a)  shall not include— (i) a railway company incorporated under any Act of Parliament or other Indian law or any Act of Parliament of the United Kingdom; (ii) a company registered under this Act; or (iii) a company registered under any previous companies law and not being a company the registered office whereof was in Burma, Aden, Pakistan immediately before the separation of that country from India; and

(b) save as aforesaid, shall include any partnership firm, limited liability partnership or society or co-operative society, association or company consisting of more than seven members at the time when the petition for winding up the partnership firm, limited liability partnership or society or co-operative society, association or company, as the case may be, is presented before the Tribunal.

WINDING UP OF UNREGISTERED COMPANIES (SECTION 375):

Any unregistered company may be wound up under this Act, in such manner as may be prescribed, and all the provisions of this Act, with respect to winding up shall apply to an unregistered company, with the exceptions and additions mentioned in sub-sections (2) to (4) of Section 375.

This is clear that Provision of Chapter XX of the Companies Act, 2013 shall apply to the winding up of an unregistered company.

Exceptions are:

1. No unregistered company shall be wound up under this Act voluntarily.
2. An unregistered company may be wound up under the following circumstances, namely:–
   1. If the company is dissolved, or ceased to carry on business, or is carrying on business only for the purpose of winding up its affairs;
   2. If the company is unable to pay its debts;
   3. If the tribunal is of the opinion that it is just and equitable that the company should be wound up.
   4. An unregistered company shall be deemed to unable to pay its debts—
      1. if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding one lakh rupees then due, has served on the company, by leaving at its principal place of business, or by delivering to the secretary, or some director, manager or principal officer of the company, or by otherwise serving in such manner as the Tribunal may approve or direct, a demand under his hand requiring the company to pay the sum so due, and the company has, for three weeks after the service of the demand, neglected to pay the sum or to secure or compound for it to the satisfaction of the creditor;
      2. if any suit or other legal proceeding has been instituted against any member for any debt or demand due, or claimed to be due, from the company, or from him in his character as a member, and notice in writing of the institution of the suit or other legal proceeding having been served on the company by leaving the same at its principal place of business or by delivering it to the secretary, or some director, manager or principal officer of the company or by otherwise serving the same in such manner as the Tribunal may approve or direct, the company has not, within ten days after service of the notice,—

                                          i.    paid, secured or compounded for the debt or demand;

                                         ii.    procured the suit or other legal proceeding to be stayed; or

                                        iii.    indemnified the defendant to his satisfaction against the suit or other legal proceeding, and against all costs, damages and expenses to be incurred by him by reason of the same

1. if execution or other process issued on a decree or order of any Court or Tribunal in favour of a creditor against the company, or any member thereof as such, or any person authorised to be sued as nominal defendant on behalf of the company, is returned unsatisfied in whole or in part;
2. if it is otherwise proved to the satisfaction of the Tribunal that the company is unable to pay its debts.

POWER TO WIND UP FOREIGN COMPANIES ALTHOUGH DISSOLVED (SECTION 376):

Where a body corporate incorporated outside India which has been carrying on business in India, ceases to carry on business in India, it may be wound up as an unregistered company under this Part. Notwithstanding that the body corporate has been dissolved or otherwise ceased to exist as such under or by virtue of the laws of the country under which it was incorporated.

PROVISIONS OF CHAPTER CUMULATIVE (SECTION 377):

The provisions of this Part, with respect to unregistered companies shall be in addition to and not in derogation of, any provisions hereinbefore in this Act contained with respect to the winding up of companies by the Tribunal. These provision are contained in Chapter XX of this Act.

The Tribunal or Official Liquidator may exercise any powers or do any act in the case of unregistered companies which might be exercised or done by the Tribunal or Official Liquidator in winding up of companies formed and registered under this Act.

An unregistered company shall not, except in the event of its being wound up, be deemed to be a company under this Act, and then only to the extent provided by this Part.

SAVING AND CONSTRUCTION OF ENACTMENTS CONFERRING POWER TO WIND UP PARTNERSHIP FIRM, ASSOCIATION OR COMPANY, ETC., IN CERTAIN CASES (SECTION 378):

Nothing in this Part, shall affect the operation of any enactment which provides for any partnership firm, limited liability partnership or society or co-operative society, association or company being wound up, or being wound up as a company or as an unregistered company, under the Companies Act, 1956, or any Act repealed by that Act.

References in any such enactment to any provision contained in the Companies Act, 1956 or in any Act repealed by that Act shall be read as references to the corresponding provision, if any, contained in this Act.

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