Powers of Central Government to Make Rules Relating to Winding Up
Section 468 of the Companies Act, 2013 outlines the authority of the Central Government to establish rules for the winding up of companies. These rules must align with the Code of Civil Procedure, 1908 and cover various aspects specified by the Act. The section empowers the Central Government to make rules on matters such as the procedure for company winding up, meetings of creditors and members, implementing capital reduction provisions, and handling applications submitted to the Tribunal.
The rules may also address the conduct of meetings to determine the preferences of creditors and contributors, the compilation of lists of contributors, correction of the membership register when necessary, and the gathering and utilization of assets. Additionally, the rules can encompass the transfer of funds, property, documents, or assets to the liquidator, the issuance of calls, and the stipulation of deadlines for proving debts and claims.
The amendment introduced by the Insolvency and Bankruptcy Code, 2016, revised sub-section (2) of Section 468. The updated version empowers the Central Government to make rules related to the winding up of companies by the Tribunal under the Companies Act, 2013. The amendment also extends the scope of these rules to cover voluntary winding up by members or creditors. The notification enforcing the related sections of the Insolvency and Bankruptcy Code, 2016, further complements this amendment.
This legislative framework ensures that the rules established by the Central Government remain in force, replacing any existing rules made by the Supreme Court. Until the Central Government formulates new rules, any reference to the High Court in the existing rules concerning the winding up of a company is construed as a reference to the Tribunal.
Let's explore examples to illustrate the provisions outlined in Section 468 of the Companies Act, 2013
1. Mode of Proceedings for Winding Up:
- Scenario: Imagine a scenario where a company is facing financial distress, and the stakeholders decide that it’s in the best interest to wind up the company.
- Provision Relevance: Section 468 empowers the Central Government to establish rules defining the procedure for winding up such a company. This could include specifying the steps, timelines, and methods for conducting the proceedings through the Tribunal.
2. Meetings of Creditors and Members:
- Scenario: In the process of winding up, creditors and members of the company need to express their views and preferences regarding the proposed actions.
- Provision Relevance: The rules can dictate how these meetings should be conducted, ensuring that the interests of both creditors and members are considered. For instance, guidelines on how voting takes place or how objections are raised could be established.
3. Reduction of Capital:
- Scenario: A company decides to reduce its share capital due to financial restructuring.
- Provision Relevance: Section 468 allows rules to be made to give effect to provisions related to the reduction of capital. This could involve defining the steps to be taken, approvals required, and the documentation necessary for such a capital reduction.
4. Applications to the Tribunal:
- Scenario: Various applications may need to be submitted to the Tribunal during the winding-up process, seeking approvals or interventions.
- Provision Relevance: The rules can outline the specifics of making these applications, including the format, documentation, and the procedure to be followed by companies seeking relief from the Tribunal during the winding-up proceedings.
5. Payment, Delivery, and Transfer of Assets to the Liquidator:
- Scenario: When a company is winding up, its assets need to be transferred to the liquidator for proper distribution among creditors and members.
- Provision Relevance: Rules can be established to guide the process of transferring money, property, books, or other assets to the liquidator, ensuring a smooth and transparent transition during the winding-up process.
6. Making of Calls:
- Scenario: In certain situations, the company may need to make calls for additional funds from its shareholders to meet its financial obligations during winding up.
- Provision Relevance: The rules can provide clarity on how and when such calls can be made, specifying the procedure, notice requirements, and the rights of shareholders in responding to these calls.
7. Timeframe for Proving Debts and Claims:
- Scenario: Creditors and claimants need a defined period to submit evidence of the debts owed to them by the company being wound up.
- Provision Relevance: Rules can set a specific time frame within which debts and claims must be proved, ensuring a structured and efficient process for the verification and settlement of outstanding financial obligations.
These examples showcase how the provisions in Section 468 empower the Central Government to create rules that provide clarity and structure to the winding-up process of companies in India. The rules aim to facilitate fair and orderly proceedings while protecting the interests of creditors, members, and other stakeholders.
Complete legal text of Section 468 of the companies act 2013
(1) The Central Government shall, make rules consistent with the Code of Civil Procedure, 1908 providing for all matters relating to the winding up of companies, which by this Act, are to be prescribed, and may make rules providing for all such matters, as may be prescribed.
1[(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:—
(i) as to the mode of proceedings to be held for winding up of a company by the Tribunal under this Act;
(ii) for the holding of meetings of creditors and members in connection with proceedings under section 230;
(iii) for giving effect to the provisions of this Act as to the reduction of the capital;
(iv) generally for all applications to be made to the Tribunal under the provisions of this Act;
(v) the holding and conducting of meetings to ascertain the wishes of creditors and contributories;
(vi) the settling of lists of contributories and the rectifying of the register of members where required, and collecting and applying the assets;
(vii) the payment, delivery, conveyance, surrender or transfer of money, property, books or papers to the liquidator;
(viii) the making of calls; and
(ix) the fixing of a time within which debts and claims shall be proved.”.]
(3) All rules made by the Supreme Court on the matters referred to in this section as itstood immediately before the commencement of this Act and in force at such commencement, shall continue to be in force, till such time the rules are made by the Central Government and any reference to the High Court in relation to winding up of a company in such rules shall be construed as a reference to the Tribunal.
Amendment
1.(a) Substituted by Insolvency and Bankruptcy Code, 2016 Dated 15th November, 2016
In section 468, for sub-section (2),
(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:—
(i) as to the mode of proceedings to be held for winding up of a company by the Tribunal;
(ii) for the voluntary winding up of companies, whether by members or by creditors;
(iii) for the holding of meetings of creditors and members in connection with proceedings under section 230;
(iv) for giving effect to the provisions of this Act as to the reduction of the capital;
(v) generally for all applications to be made to the Tribunal under the provisions of this Act;
(vi) the holding and conducting of meetings to ascertain the wishes of creditors and contributories;
(vii) the settling of lists of contributories and the rectifying of the register of members where required, and collecting and applying the assets;
(viii) the payment, delivery, conveyance, surrender or transfer of money, property, books or papers to the liquidator;
(ix) the making of calls; and
(x) the fixing of a time within which debts and claims shall be proved.
the following sub-section shall be substituted, namely:—
(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:—
(i) as to the mode of proceedings to be held for winding up of a company by the Tribunal under this Act;
(ii) for the holding of meetings of creditors and members in connection with proceedings under section 230;
(iii) for giving effect to the provisions of this Act as to the reduction of the capital;
(iv) generally for all applications to be made to the Tribunal under the provisions of this Act;
(v) the holding and conducting of meetings to ascertain the wishes of creditors and contributories;
(vi) the settling of lists of contributories and the rectifying of the register of members where required, and collecting and applying the assets;
(vii) the payment, delivery, conveyance, surrender or transfer of money, property, books or papers to the liquidator;
(viii) the making of calls; and
(ix) the fixing of a time within which debts and claims shall be proved.”.
(b) The MCA Notification No. F.O. 3453(E) Dated 15th November, 2016, enforcing the related sections of Insolvency and Bankruptcy Code, 2016.
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