Companies Act Section 277

Companies Act, Section 277: Intimation to Company Liquidator, Provisional Liquidator, and Registrar, and Constitution of Winding Up Committee

Section 277 of the Companies Act, 2013 lays down a detailed procedure that must be followed after the Tribunal passes an order for the winding up of a company or for the appointment of a provisional liquidator. The section not only mandates timely communication of such orders to relevant authorities but also establishes a winding-up committee to assist in and monitor the liquidation process. It ensures a transparent, accountable, and coordinated approach during the course of winding up.

Sub-section (1): Notification of Appointment to Company Liquidator, Provisional Liquidator, and Registrar

Upon the Tribunal making an order for the:

Appointment of a Provisional Liquidator, or Winding up of a company, the Tribunal is obligated to send intimation of the said order to both:

The Company Liquidator or the Provisional Liquidator, as applicable, and The Registrar of Companies (ROC).
This communication must be carried out within a period not exceeding seven days from the date of passing such an order. This timeframe ensures that the liquidation process begins without unnecessary delay and that all involved authorities are duly informed of the developments.

Sub-section (2): Role of the Registrar Upon Receiving Intimation

Once the Registrar receives a copy of the Tribunal’s order either appointing a provisional liquidator or ordering the winding up of the company the Registrar must undertake the following steps:

Endorse the order in the official records relating to the company, thereby updating the company’s legal status in the official register.
Notify the order in the Official Gazette, providing public notice of the order and its implications.
In case the company is listed on a stock exchange, the Registrar is further required to inform the relevant stock exchange(s) where the securities of the company are listed, thereby ensuring full disclosure to investors and the market.
Sub-section (3): Legal Effect of Winding Up Order on Company Employees

The issuance of a winding up order is treated as a notice of discharge to all the officers, employees, and workmen of the company. This discharge is deemed to have occurred by operation of law unless the Tribunal orders the continuation of the company’s business, either in full or in part. This provision ensures clarity on the employment status of individuals post-winding up and aligns with the closure or continuation of operations.

Sub-section (4): Constitution of Winding Up Committee

To oversee and assist in the effective liquidation of the company, the Company Liquidator must make an application to the Tribunal within three weeks of the winding up order, seeking the constitution of a winding up committee. The committee is intended to assist and monitor the liquidation proceedings and comprises:

The Official Liquidator attached to the Tribunal.
A nominee of the secured creditors of the company.
A professional nominated by the Tribunal, typically someone with legal, financial, or insolvency expertise.
This multi-stakeholder composition ensures balanced representation and oversight throughout the liquidation process.

Sub-section (5): Functions of the Winding Up Committee

The Company Liquidator serves as the convener of all meetings of the winding up committee. The committee plays an advisory and supervisory role in assisting the Liquidator across a broad range of liquidation functions, including:

Taking over assets of the company.
Examining the statement of affairs submitted by the company.
Recovering property, cash, or other assets and pursuing any benefits arising therefrom.
Reviewing audit reports and financial accounts of the company to understand its financial position.
Selling the company’s assets to realize value.
Finalising the list of creditors and contributories, thereby identifying claims and obligations.
Compromising, abandoning, or settling claims, where appropriate, in consultation with stakeholders.
Disbursing dividends, if any, from the available surplus after liabilities are settled.
Carrying out any other function as may be directed by the Tribunal from time to time.
This ensures that the liquidation process is transparent, systematic, and closely monitored.

Sub-section (6): Monthly Reports to Tribunal

The Company Liquidator is required to submit a monthly report to the Tribunal, which must include:

A detailed status report on the progress of the liquidation proceedings.
Minutes of the meetings of the winding up committee, signed by all members who were present.
These monthly submissions enable the Tribunal to maintain close oversight and provide directions or interventions where necessary until the final dissolution report is submitted.

Sub-section (7): Drafting of the Final Report

Once the liquidation process nears completion, the Company Liquidator is required to prepare a draft final report, summarizing:

The actions undertaken during the liquidation, The final financial outcome, The status of creditor payments, Any unresolved matters, and Recommendations for dissolution.
This draft must be presented to the winding up committee for its consideration and approval, ensuring that the process is subjected to one final layer of scrutiny before submission.

Sub-section (8): Submission of Final Report and Dissolution Order

After the draft report is approved by the winding up committee, the Company Liquidator must submit the final report to the Tribunal. Upon satisfaction, the Tribunal may then pass an order for the dissolution of the company, thereby formally bringing the company’s legal existence to an end.