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Introduction to Business

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Introduction to Business ­MGT 211
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LESSON 11
WINDING UP OF COMPANY
A company is created by law and when the legal existence of company abolishes or comes to
an end it is called winding up of a company or liquidation of company.
MODES OF WINDING UP
A company can be wound up in the following three ways:
Winding up of Joint Stock Company
Compulsory
Voluntary
Under the
Winding up
Winding Up
Supervision
by Court
of Court
By Members
By Creditors
COMPULSORY WINDING UP BY COURT
According to Section 305 of Companies Ordinance, a company may be wound up by court
under the following circumstances:
1. Special Resolution
If a special resolution has been passed by the company for winding up.
2. Statutory Meeting
If the company fails to submit statutory report to the Registrar for failure to hold statutory
meeting within specified time.
3. Commencement of Business
If a company fails to start its business within one year from the date of incorporation or
postpones its business for one year.
4. Reduction in Members
If the number of members fall below seven in case of public company and below two in case of
private company.
5. Satisfaction of Court
If the court is not satisfied with the working, management and business affairs of the company
6. Payment of Loans
If a company is unable to pay its debts.
7. Unlisted
If a company declares itself unlisted due to any reason.
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Introduction to Business ­MGT 211
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VOLUNTARY WIDNIGN UP
A joint stock company may be wound up voluntarily in following two ways:
1. By Members
According to section 362 of Companies Ordinance, 1984, the members can wind up a
company voluntarily under following circumstances:
(i ) Expiry of Period
A company may be wound up voluntarily by the members, after the expiry of period, by
passing resolution in the general meeting.
(ii) Statutory Declaration
If majority of directors makes a statutory declaration to registrar that the company will be able
to pay its debts in full within one year.
(iii) Special or Ordinary Resolution
After submitting the statutory declaration to the registrar, the company, in general meeting
passes an ordinary or special resolution to wind up the company.
(iv) Appointment of Liquidators
In general meeting, the company appoints liquidators to wind up the company's affairs. Within
ten days after the appointment must be sent to registrar.
(v) Final Meeting
After winding up the affairs of company, the liquidators call the general meeting of the
shareholders. In this meeting, the liquidators must submit the final accounts of company's
affairs to the members.
(vi) Dissolution
Within one week of general meeting, liquidators must file a copy of full accounts to the
registrar. At the end of 3 months from the date of registration of return, the company shall be
dissolved and its name will be struck off by the Registrar of Joint Stock company.
2. By Creditors
The Members can wind up a company voluntarily under following circumstances:
(i) Statutory Declaration
In case of creditors voluntary winding up, it is not necessary for the company to make a
statutory declaration regarding its solvency.
(ii) Special Resolution
A general meeting of the company's shareholders is called to pass an extra ordinary resolution
for the dissolution of the company because it cannot continue its business due to heavy
liabilities.
(iii) Creditors' Meeting
On the same or next day, a meeting of creditors must be called by the company. A notice of
meeting must be sent to each creditor.
(iv) Statement of Affairs
In the creditors' meeting, the directors must submit a statement of affairs of the company,
together with a list of creditors of the company and estimated amount of their claims.
(v) Intimation to Registrar
The information regarding the notice of passed resolution must be sent to the registrar within
ten days after the date of creditors' meeting.
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Introduction to Business ­MGT 211
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(vi) Appointment of Liquidator
The creditors and shareholders nominate the persons to act as liquidators in their respective
meetings. the opinion of the creditors is preferred.
(vii) Inspection Committee
The creditors and shareholders, in their respective meetings can appoint eh inspection
committee consisting of five persons in each case.
(viii) Liquidators' Remuneration, Rights and Duties
The inspection committee fixes the remuneration, rights and duties of the liquidators.
(ix) Final Meeting
In the final meeting, the liquidators place before them the full accounts of the company's affairs
and a copy of these accounts is also sent to registrar within 7 days.
(x) Dissolution
The registrar registers the documents, sent by the company, After 3 months from the date of
registration, the company will be dissolved.
VOLUNTARY WINDING UP UNDER THE SUPERVISION OF COURT
According to section 396 of Companies Ordinance, a voluntary winding up of a company can
also be carried under the strict registration of the court.
1. Resolution
At first, company has to pass special resolution for the voluntary winding up of the company.
2. Supervision Order
Following are the common grounds on which the court issues the supervision order:
1. The liquidator performs his duty in partial manner.
2. The winding up resolution is obtained by fraud.
3. The liquidator does not strictly observe the rules of winding up the company
3. Power of the Court
The court has the power to appoint an additional liquidator, or to remove any liquidator.
4. Dissolution
After the supervision order is made, the liquidator may exercise his powers in winding up of a
company. On completion of winding up, the court will make an order that the company is
dissolved.
SHARE CAPITAL
In simple words, the term "capital" means the particular amount of money with which a
business is started.
In company, share capital means the amount contributed by the shareholders.
DEFINITION
1.
According to alan Issacs,
Share capital is that part of the capital of a company that arises from the issue of
shares.
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2.
L. B. Curzon says,
Share capital is the total amount which a company's shareholders have contributed or
are liable to contribute as payment for their shares.
KINDS OF SHARE CAPITAL
According to Companies Ordinance, 1984, the following are the kinds of share capital:
1. Authorized Capital
This is maximum amount of capital with which a company is registered or authorized to issue.
It is divided into shares of small value.
For example, the authorized capital of the company Rs. 10,00,000 divided into
1,00,000 shares of Rs. 10 each.
2. Issued Capital
It is a part of authorized capital which is offered to the general public for sale.
For example, a company has an authorized capital of Rs. 10,00,000 dividend into 1,00,000
shares of Rs. 10 each. It offers 20,000 shares of Rs. 10 each to general public. So it means
issued capital is Rs. 2,00,000.
3. Un-Issued Capital
It is a part of authorized capital which is not offered to the general public for sale.
For example, a company has an authorized capital of Rs. 10,00,000 divided into 1,00,000
shares of Rs. 10 each. It offers 20,000 shares of Rs. 10 each to general public. So it means
un-issued capital is Rs. 8,00,000 consisting of 80,000 shares of Rs. 10 each.
4. Subscribed Capital
That part of issued capital for which application are sent by the public and which are accepted
is called subscribed capital.
For example, out of 20,000 shares offered by the company, the general public takes up only
10,000 shares. So subscribed capital, is Rs. 1,00,000.
5. Called up Capital
A company may require payment of the par value either in installments or in lump sum. So
amount of shares demanded by company is known as "called up capital".
For example, out of 10,000 shares taken by public, company requires a payment of 6 per
share. So "called up" capital of the company is Rs. 60,000 (10,000 share @ Rs. 6).
6. Un-Called up Capital
A company may require payment of the par value either in installments or in lump sum. So
amount of shares not demanded by company is known as "un-called up capital".
For example, out of 10,000 share taken by public, the company requires a payment of 6 per
share. So "un-called up" capital of the company is rs. 40,000 (10,000 shares @ Rs. 4).
7. Paid up Capital
It is that part of called up capital which is actually received by the company.  If some
shareholders could not pay all the money of called up capital, such money is called as "calls in
arrears" or "calls unpaid".
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Introduction to Business ­MGT 211
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8. Reserve Capital
The capital which is reserved for unexpected events or for future needs is called reserve
capital. Company decides not to call up some part of uncalled up capital until winding up. It is
normally kept for the payment of debts at the time of winding up.
9. Redeemable Capital
A company can obtain redeemable capital by issue of:
(a)
Participation Term Certificates
(b)
Musharika Certificate
(c)
Term Finance Certificate
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Table of Contents:
  1. INTRODUCTION:CONCEPT OF BUSINESS, KINDS OF INDSTRY, TYPES OF TRADE
  2. ORGANIZATIONAL BOUNDARIES AND ENVIRONMENTS:THE ECONOMIC ENVIRONMENT
  3. BUSINESS ORGANIZATION:Sole Proprietorship, Joint Stock Company, Combination
  4. SOLE PROPRIETORSHIP AND ITS CHARACTERISTICS:ADVANTAGES OF SOLE PROPRIETORSHIP
  5. PARTNERSHIP AND ITS CHARACTERISTICS:ADVANTAGES AND DISADVANTAGES OF PARTNERSHIP
  6. PARTNERSHIP (Continued):KINDS OF PARTNERS, PARTNERSHIP AT WILL
  7. PARTNERSHIP (Continued):PARTNESHIP AGREEMENT, CONCLUSION, DUTIES OF PARTNERS
  8. ORGANIZATIONAL BOUNDARIES AND ENVIRONMENTS:ETHICS IN THE WORKPLACE, SOCIAL RESPONSIBILITY
  9. JOINT STOCK COMPANY:PRIVATE COMPANY, PROMOTION STAGE, INCORPORATION STAGE
  10. LEGAL DOCUMENTS ISSUED BY A COMPANY:MEMORANDUM OF ASSOCIATION, CONTENTS OF ARTICLES
  11. WINDING UP OF COMPANY:VOLUNTARY WIDNIGN UP, KINDS OF SHARE CAPITAL
  12. COOPERATIVE SOCIETY:ADVANTAGES OF COOPERATIVE SOCIETY
  13. WHO ARE MANAGERS?:THE MANAGEMENT PROCESS, BASIC MANAGEMENT SKILLS
  14. HUMAN RESOURCE MANAGEMENT:Human Resource Planning
  15. STAFFING:STAFFING THE ORGANIZATION
  16. STAFF TRAINING & DEVELOPMENT:Typical Topics of Employee Training, Training Methods
  17. BUSINESS MANAGERíS RESPONSIBILITY PROFILE:Accountability, Specific responsibilities
  18. COMPENSATION AND BENEFITS:THE LEGAL CONTEXT OF HR MANAGEMENT, DEALING WITH ORGANIZED LABOR
  19. COMPENSATION AND BENEFITS (Continued):MOTIVATION IN THE WORKPLACE
  20. STRATEGIES FOR ENHANCING JOB SATISFACTION AND MORALE
  21. MANAGERIAL STYLES AND LEADERSHIP:Changing Patterns of Leadership
  22. MARKETING:What Is Marketing?, Marketing: Providing Value and Satisfaction
  23. THE MARKETING ENVIRONMENT:THE MARKETING MIX, Product differentiation
  24. MARKET RESEARCH:Market information, Market Segmentation, Market Trends
  25. MARKET RESEARCH PROCESS:Select the research design, Collecting and analyzing data
  26. MARKETING RESEARCH:Data Warehousing and Data Mining
  27. LEARNING EXPERIENCES OF STUDENTS EARNING LOWER LEVEL CREDIT:Discussion Topics, Market Segmentation
  28. UNDERSTANDING CONSUMER BEHAVIOR:The Consumer Buying Process
  29. THE DISTRIBUTION MIX:Intermediaries and Distribution Channels, Distribution of Business Products
  30. PHYSICAL DISTRIBUTION:Transportation Operations, Distribution as a Marketing Strategy
  31. PROMOTION:Information and Exchange Values, Promotional Strategies
  32. ADVERTISING PROMOTION:Advertising Strategies, Advertising Media
  33. PERSONAL SELLING:Personal Selling Situations, The Personal Selling Process
  34. SALES PROMOTIONS:Publicity and Public Relations, Promotional Practices in Small Business
  35. THE PRODUCTIVITY:Responding to the Productivity Challenge, Domestic Productivity
  36. THE PLANNING PROCESS:Strengths, Weaknesses, Threats
  37. TOTAL QUALITY MANAGEMENT:Planning for Quality, Controlling for Quality
  38. TOTAL QUALITY MANAGEMENT (continued):Tools for Total Quality Management
  39. TOTAL QUALITY MANAGEMENT (continued):Process Re-engineering, Emphasizing Quality of Work Life
  40. BUSINESS IN DIGITAL AGE:Types of Information Systems, Telecommunications and Networks
  41. NON-VERBAL COMMUNICATION MODES:Body Movement, Facial Expressions
  42. BUSINESS ORGANIZATIONS:Organization as a System
  43. ACCOUNTING:Accounting Information System, Financial versus Managerial Accounting
  44. TOOLS OF THE ACCOUNTING TRADE:Double-Entry Accounting, Assets
  45. FINANCIAL MANAGEMENT:The Role of the Financial Manager, Short-Term (Operating) Expenditures