Companies Act Section 287

Companies Act, Section 287: Constitution and Functioning of an Advisory Committee in Winding-Up Proceedings

Section 287 of the Companies Act, 2013 introduces the concept of an Advisory Committee in the context of company liquidation. This provision allows the Tribunal to establish a structured body of stakeholders to support the Company Liquidator and provide oversight during the winding-up process. The intent is to ensure transparency, stakeholder representation, and informed decision-making as the liquidation unfolds.

An Advisory Committee plays a dual role it advises the Company Liquidator on crucial matters and reports to the Tribunal on issues as directed. The involvement of creditors, contributories, and other relevant individuals fosters a balanced and accountable liquidation process.

1. Power of the Tribunal to Constitute an Advisory Committee

When the Tribunal passes an order for the winding up of a company, it may, as part of the same or subsequent order, direct that an Advisory Committee be formed. This committee is intended to act as a consultative and oversight mechanism to assist the Company Liquidator and to report back to the Tribunal on matters specifically identified by the Tribunal.

The decision to constitute such a committee lies within the discretion of the Tribunal, and is typically based on the complexity of the company’s affairs, stakeholder interests, or the need for additional oversight during the winding-up process.

2. Composition of the Advisory Committee

The Tribunal is empowered to determine the composition and size of the Advisory Committee, subject to certain limits:

The committee shall consist of no more than twelve members.
Members may be drawn from among the creditors and contributories of the company.
Additionally, the Tribunal may include other persons as members, depending on the unique circumstances and requirements of the liquidation.
The proportion and selection of members creditors, contributories, or others are to be decided by the Tribunal, taking into account the interests of the company, the stakeholders involved, and the practicalities of the liquidation process.
This structure is designed to promote balanced representation and diverse expertise, ensuring that the committee effectively supports the liquidation process.

3. Procedure for Identifying Committee Members

To determine who should be included in the Advisory Committee, the Company Liquidator is required to convene a meeting of creditors and contributories. This meeting must be held within thirty days from the date the winding-up order is passed by the Tribunal.

The Liquidator must identify eligible creditors and contributories based on the books, records, and documents of the company.
The purpose of the meeting is to facilitate the Tribunal in ascertaining the most appropriate individuals to serve as committee members.
The meeting ensures stakeholder participation in the process of forming the committee and allows for representation of those with a genuine interest in the affairs of the company.
4. Rights of the Advisory Committee

Once constituted, the Advisory Committee is vested with important rights and functions:

It is entitled to inspect the company’s books of account, records, and other documents.
The committee may also inspect the assets and properties of the company in liquidation.
These inspections must take place at reasonable times, thereby allowing the committee to exercise its oversight role without disrupting the Liquidator’s work.
Such rights empower the committee to remain well-informed and provide meaningful input on the liquidation process.

5. Procedure for Meetings and Conduct of Business

The manner in which the Advisory Committee conducts its business, including how it convenes meetings, adopts resolutions, and interacts with the Company Liquidator, is subject to specific procedures that are to be prescribed under the rules made pursuant to the Act.

These procedural rules ensure uniformity, clarity, and order in the committee’s operations, and may cover:

Notice requirements for meetings, Quorum provisions, Voting procedures, reporting formats, timelines, and Frequency of meetings.
This procedural framework ensures the committee functions efficiently and provides timely advice and reports to both the Liquidator and the Tribunal.

6. Chairing of the Advisory Committee

All meetings of the Advisory Committee shall be chaired by the Company Liquidator. As the central figure responsible for managing the winding-up process, the Liquidator facilitates and guides the committee discussions, ensuring that:

The committee is kept informed of important developments, Members are given the opportunity to raise concerns or offer suggestions. Discussions remain focused on the Tribunal’s directives and the orderly conduct of liquidation.
By chairing the committee, the Company Liquidator maintains cohesion between advisory inputs and liquidation actions, fostering greater coordination and accountability.