‘Winding up’ of a Company is a process of closing or finishing up of a Company.
Under this process, the company ceases to carry on its business. The management of its affairs is taken out of the directors hand. Instead, an administrator called liquidator is appointed who takes control of the company in his hands. They realize its assets and pays its debts from the money so realized and finally distributes the surplus among the members according to their rights. Thus, at the end of the winding-up process, the company will have no assets and liabilities and therefore it will take a formal step for its dissolution.
In this way, winding up may be defined as a process of closing down a Company after the realization of its assets, liabilities and distribution of remaining surplus among its members.
WINDING UP OF A COMPANY AGREEMENT
This Agreement is entered into effective as of____________,
By and between
(Party A) having its registered Office at, (Address) (hereinafter referred to as) “____________” (which expression shall unless it be repugnant to the context or meaning thereof, be deemed to mean and include its successors and assigns) of the one part.
(Party B). having its Registered Office at (Address) , (hereinafter referred) to as “____________” (which expression shall, unless repugnant to the context or meaning thereof, mean and include their successors and assigns) of the other part;
Party A and Party B entered into a agreement on ______________,
Each Party has agreed to abide by the right and interest in the agreement on the terms and conditions set forth below. The parties intent to wind up the company in pursuant to the spirit of this Agreement and liquidation of the assets of the Company and distributribution amongst the parties herein shall be as per the terms and conditions stated..
NOW, THIS AGREEMENT WITNESSETH that in consideration of the mutual promises, assurances and understanding herein contained the Parties here to has agreed as follows:
1.1 The Parties agrees to wind up the company with effect from _______and thereafter promptly liquidates and winds-up the affairs of the parties.
1.2 In case the winding up shows a loss or the assets of the company and are insufficient to meet the liabilities and debts of the company then the parties shall forthwith pay such losses in the proportion of their contribution to the capital or as may be ordered by the court of jurisdiction in case of any dispute.
2.1 Liquidator is appointed when a company goes into liquidation or is wound up by the Court in a compulsory liquidation process.
2.2 The company shall in its general meeting, where a resolution of voluntary winding
up is passed, shall select and appoint a Company Liquidator from the panel prepared by the Central Government for the purpose of winding up its affairs and distributing the assets of the company and recommend the fee to be paid to the Company Liquidator.
2.2 Liquidator shall be appointed to carry out the process of the winding up of the Company within the specified period of _______or as mutually agreed between the parties hereto.
2.2 Liquidator shall be responsible for determining the assets and liabilities and distribute the assets accordingly.
NATURE OF BUSINESS
3.1 The assets and liabilities of the Company as mentioned in Clause 3.3 and 3.4.
3.2 Name,address and occupation of the Company as mentioned in the ___.
3.3 Assets which may include Cash, Investments, Inventory, Office equipment, Machinery, Real estate, Company-owned vehicles.
3.4 Liabilities which include Bank debt, Mortgage debt, Money owed to suppliers (accounts payable), Wages or, Taxes pending if any..
The Valuation for business assets as mentioned in Clause 3.3 are accumulated by market value, book value, liquidation value. Each level of value provides a way for accountants and analysts to classify the aggregate value of assets.
OBLIGATIONS OF LIQUIDATOR
5.1 Liquidator shall verify claims of all the creditors and consolidate them.
5.2 Liquidator shall take into his custody or control all the assets, property, effects and actionable claims.
5.3 Liquidator shall evaluate the assets and property of the company in the manner and prepare a report.
5.4 Liquidator shall take such measures to protect and preserve the assets and properties of the Company.
5.5 Liquidator shall carry on the business of the Company for its beneficial liquidation.
5.6 Liquidator shall invite and settle claims of creditors and claimants and distribute proceeds in accordance with the Memorandum of Association.
5.7 Liquidator shall investigate the financial affairs of the Company to determine undervalued or preferential transactions.
5.8 Liquidator shall take all such actions, steps, or to sign, execute and verify any paper, deed, receipt document, application, petition, affidavit, bond or instrument and for such purpose to use the common seal, if any, as may be necessary for liquidation, distribution of assets and in discharge of his duties and obligations and functions as liquidator.
OBLIGATIONS OF PARTIES
6.1 The parties shall not incur any obligation other than reasonably required for the disposition of assets and liabilities and activities related to the Winding-up and liquidation plan.
6.2 The authorised members shall deliver any books and records and information that the liquidator requires for the purposes of investigation for winding up.
7.1 Liquidator shall ensure all company contracts (including employee contracts) are completed, transferred or otherwise brought to an end;
7.2 Ceasing the company's business and settling any legal disputes;
7.3 Selling assets and collecting in money owed to the company;
7.4 Distributing any funds to creditors and returning share capital to the shareholders (any surplus after repayment of all debts and share capital can be distributed to shareholders).
7.5 Liquidator shall make a structured plan in the selling of the assets of the Company subject to the liquidation process herein so as to smoothen the liquidation process.
The lease payments shall be constructed as a part of the expenses incurred on the winding-up process from the realisation which shall be made by way of sale of assets of the Company’s winding-up process if any or wherever applicable.
Various state laws may need to be adhered to, including notifying the company’s creditors, requiring corporate stockholders to vote on the sale, protecting the rights of minority shareholders, accounting for transfer or sales taxes, both parties obtaining tax certificates, etc.
Upon agreeing to all details, both parties will move on to signing agreements regarding transferring ownership, security interests, promissory notes, and other documents third-party lenders may require. The Company shall receive the buyer’s down payment, and the buyer will get possession of the sold assets.
REALISATION OF ASSETS
11.1 Liquidator shall recover and realise the company’s assets in the most advantageous manner to the company.
11.2 Liquidator shall adjudicate the claims of the creditors and ensure an equitable distribution of the company’s assets in accordance with the provisions of the Companies Act.
11.3 Liquidator shall investigate the Claim by creditors who claim to be a stakeholder, shall prove his claim for debt or dues to him, including interest, if any, as on the liquidation commencement date.
11.3.1 The existence of debt due to a creditor shall be proved by the liquidator on the basis of the records available with an information utility, other relevant documents which adequately establish the debt by a contract for the supply of goods or services with a corporate person which supported by an invoice demanding payment for the goods and services supplied to the corporate person.
11.4 Liquidator shall investigate the workmen and employees dues by a proof of employment such as contract of employment for the period for which such workman or employee is claiming dues.
MEMORANDUM OF ASSOCIATION
The Parties mutually agree to abide by the Memorandum of Association compliances and wherever required specifically to ascertain the aspects of liability and its limitation to the extent of their shareholders and how to absorb the funds generated by the process of the selling of assets of the company from the liquidation or otherwise. The Liquidator shall also make sure that the investors are being informed about the winding up of a company initiation and process with the sufficient information which they may require in regards to the prospects of the company from the objects in connection with this clause and in pursuant to this Agreement. Either party agreed that subject to the compliances with laws of the nation, they shall adhere to regulate the liquidation of a company as per Memorandum of Association which is Annexure -A attached herewith this Agreement..
ARTICLE OF ASSOCIATION
13.1. The Liquidator, director and other members shall perform their functions as regards the management of the company, its accounts, and audits, dividends reserves, the board of directors meetings, voting rights for winding up process in accordance with the AOA.
13.2. The cost, charges of winding up process and the adjustment of the rights of the contributors are specified by making reference to the Article of Association of the Company.
13.3 The issuance of any framework or strategies shall be subject to the reference and compliance by making reference to the Annexure -B attached herewith for reference to the Article of Association of the company herein.
13.4 Either party agreed that subject to the compliances with laws of the nation, in case of any dispute or inconsistency between the parties hereto arises with regards to the provisions stated in this Agreement and leads to conflict or dispute or issues the provisions of the Annexure B which is Article of Association shall prevail and will be binding.
13.5. The Parties agrees that during the whole liquidation process all actions necessary to be taken are in pursuant to this Agreement and reflective of the spirit of the Annexure - B attached herewith.
DISTRIBUTION OF ASSETS
The Liquidator shall process the sale of assets and proceeds from the realisation shall be paid as priority mentioned in the Memorandum of Association and Article of Association.
13.1 Shall take into account the Cost and Expenses of the company subject to winding up.
13.2 The parties hereby agree to pay wages or salary including wages payable for time or piece work and salary earned wholly or in part by way of commission of any employee in respect of services rendered to the company immediately before the Term of this Agreement.
13.3 The parties agree to pay the sums due to any employee from the provident fund, pension fund or gratuity fund or any other fund for the welfare of the company before the Term of this Agreement.
13.4 Liquidator shall pay the claims of creditors who claim to be a stakeholder in reference to the priority list.
13.5 Preference shareholders are entitled to receive repayment of capital after creditors of the company have been paid.
13.6 Equity shareholders shall receive their share of the capital after preference shareholders are paid.
TAXES AND ACCOUNTS
15.1 All the taxes, ceases, revenues due from the company to the Government shall be paid including the amount to be received on account of the Consolidated Fund of India and the Consolidated Fund of a State.
15.2 Liquidator shall make an entry in the records to examine the accounts for the purpose of winding up.
No parties shall be required to make any Capital Contribution in the Company when the liquidation process shall be initiated by the liquidation.
The parties agree to complete the winding up of its business and affairs effective as of ___________.
LIMITATION OF LIABILITY
In no event shall parties, board members, senior members shall be liable for special, incidental, indirect or consequential damages, damages from distribution of accumulated sale proceeds or such loss, cost of damages, arising out of or in connection with this Agreement. The Company’s Memorandum of Association shall be made reference in deciding upon the liability limitation if any conflict arises in the agreed provisions of this Agreement.
_________ shall be hereby agreed to defend, indemnify and hold harmless the ________________ from and against any and all suits, actions, claims, judgements, debts, demands, losses, claims, obligations or rights of action of any kind or nature arising from breach of the terms and conditions.
In Cases where the lawfully correct information and due assistance has not been provided to the liquidator, the people concerned with disclosing the material information regarding the assets and financial details of the company subject to liquidation, the liquidator can initiate the criminal actions.
GOVERNING LAWS AND JURISDICTION
This Agreement and any disputes arising hereunder shall be governed in accordance with the laws of India without regard to principles of equity.
All disputes, differences and/or claims arising out of, or relating to, or in connection with this Agreement or the breach, termination or validity hereof shall be referred to the exclusive jurisdiction of the courts of New Delhi, India for resolution of such disputes. The final judgment shall be final and binding on the parties.
IN WITNESS WHEREOF, the parties have executed this agreement as of the date first above written.
By: Party A
By: Party B
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