Powers of a Company Liquidator: Section 290

The powers of a company liquidator in a winding up by the Tribunal are listed in one long sub-section. Section 290(1) of the Companies Act, 2013 gives fourteen, lettered (a) to (n), and opens by making all of them Subject to directions by the Tribunal, if any. The sections around it then say who the liquidator must listen to, which acts need the Tribunal's sanction first, and what a creditor can do about a decision already taken.

What are the fourteen powers of a company liquidator?

Section 290(1) opens Subject to directions by the Tribunal, if any, in this regard, the Company Liquidator, in a winding up of a company by the Tribunal, shall have the power, and then lists clauses (a) to (n). They group into five kinds of act.

Running and selling the business. Clause (a) is the power to carry on the business of the company so far as may be necessary for the beneficial winding up of the company, which is purpose limited rather than open ended. Clause (c) is the power to sell the immovable and movable property and actionable claims of the company by public auction or private contract, with power to transfer such property to any person or body corporate, or to sell the same in parcels. Clause (d) is separate and larger: to sell the whole of the undertaking of the company as a going concern.

Raising money and signing for the company. Clause (e) is the power to raise any money required on the security of the assets of the company. Clause (b) covers doing all acts and executing, in the name and on behalf of the company, all deeds, receipts and other documents, using the company's seal when necessary. Clause (j) adds negotiable instruments, including cheque, bill of exchange, hundi or promissory note, drawn with the same effect on the company's liability as if drawn in the course of its business.

Litigating. Clause (f) is the power to institute or defend any suit, prosecution or other legal proceeding, civil or criminal, in the name and on behalf of the company.

Collecting in. Clause (g) is the power to invite and settle claim of creditors, employees or any other claimant and distribute sale proceeds in accordance with priorities established under this Act, which is the clause that ties the liquidator's distribution to the preferential payment rules rather than to his own judgement. Clause (h) allows inspection of the records and returns of the company on the files of the Registrar or any other authority. Clause (i) allows him to prove rank and claim in the insolvency of any contributory for any balance against his estate, and to receive dividends in that insolvency as a separate debt due from the insolvent, sharing with the other separate creditors. The Act prints the closing words of clause (i) as rate ably, in two words. Clause (k) lets him take out letters of administration to any deceased contributory in his official name, with the money then deemed due to the Company Liquidator himself so that it can be recovered at all.

Housekeeping and asking. Clause (l) covers obtaining professional assistance or appointing an agent. Clause (m) covers signing, executing and verifying any paper, deed, document, application, petition, affidavit, bond or instrument as may be necessary for the winding up, for distribution of assets, and in discharge of his duties. Clause (n) is the residual one: to apply to the Tribunal for such orders or directions as may be necessary for the winding up of the company.

Two sub-sections close the section. Section 290(2) states that The exercise of powers by the Company Liquidator under sub-section (1) shall be subject to the overall control of the Tribunal. Section 290(3) then adds duties on top: Notwithstanding the provisions of sub-section (1), the Company Liquidator shall perform such other duties as the Tribunal may specify in this behalf.

Whose directions must the liquidator follow?

Two bodies, in a stated order of precedence. Section 292(1) requires the liquidator, in the administration of the assets of the company and the distribution thereof among its creditors, to have regard to any directions which may be given by the resolution of the creditors or contributories at any general meeting or by the advisory committee.

Section 292(2) then resolves the clash: Any directions given by the creditors or contributories at any general meeting shall, in case of conflict, be deemed to override any directions given by the advisory committee. The advisory committee itself is a creature of section 287, appointed at the Tribunal's direction, capped at not more than twelve members, and chaired by the Company Liquidator.

Section 292(3) decides who can force a meeting. The liquidator may summon meetings of the creditors or contributories, whenever he thinks fit, and shall summon such meetings at such times as they direct by resolution, or whenever requested in writing to do so by not less than one-tenth in value of the creditors or contributories, as the case may be. That one-tenth threshold is measured in value, not in heads.

What can someone do about a decision already made?

Apply to the Tribunal, and the Tribunal can undo it. Section 292(4) states that Any person aggrieved by any act or decision of the Company Liquidator may apply to the Tribunal, and the Tribunal may confirm, reverse or modify the act or decision complained of and make such further order as it thinks just and proper in the circumstances.

The class of applicant is any person aggrieved, which is wider than creditors and contributories, and the three verbs the Tribunal is given are confirm, reverse and modify. Section 343(3) adds a parallel route for the sanctioned powers: Any creditor or contributory may apply in the manner prescribed to the Tribunal with respect to any exercise or proposed exercise of powers under that section, and the Tribunal shall pass orders after giving a reasonable opportunity to such applicant and the Company Liquidator. Note the tense in that one. It reaches a proposed exercise, so it can be used before the act rather than only after it.

Which powers need the Tribunal's sanction first?

Three, and they are in a different Part of the Chapter. Section 343(1) provides that the Company Liquidator may, with the sanction of the Tribunal, when the company is being wound up by the Tribunal:

• (i) pay any class of creditors in full;
• (ii) make any compromise or arrangement with creditors or persons claiming to be creditors, or having or alleging themselves to have any claim, present or future, certain or contingent, against the company, or whereby the company may be rendered liable; or
• (iii) compromise any call or liability to call, debt, and liability capable of resulting in a debt, and any claim subsisting or alleged to subsist between the company and a contributory or alleged contributory or other debtor or person apprehending liability to the company, on such terms as may be agreed, taking security and giving a complete discharge.

Clause (iii) is the one that touches the list of contributories, because a compromise of a call is a compromise of the very liability that list fixes.

A cross-reference inside section 343 no longer matches its own text, and it is worth naming rather than reading past. Sub-section (2) lets the Central Government make rules allowing the liquidator to exercise any of the powers referred to in sub-clause (ii) or sub-clause (iii) of clause (b) of sub-section (1) without the Tribunal's sanction. Sub-section (1) as printed has no clause (b): it has clauses (i), (ii) and (iii). Sub-section (1) was substituted by Act 31 of 2016, section 255 and the Eleventh Schedule, with effect from 15 November 2016, and sub-section (2) was left pointing at the older lettering.

What must the liquidator keep, and who checks it?

Section 291 lets him buy in help, with sanction: one or more chartered accountants or company secretaries or cost accountants or legal practitioners or such other professionals, appointed with the sanction of the Tribunal, and each must disclose forthwith to the Tribunal in the prescribed form any conflict of interest or lack of independence, which mirrors the duty section 275(6) puts on the Company Liquidator himself.

Section 293 requires proper books, in which entries or minutes of proceedings at meetings are made, and lets any creditor or contributory, subject to the Tribunal's control, inspect them personally or through an agent. Section 294 requires proper and regular books of account, an account of receipts and payments presented to the Tribunal not less than twice in each year during his tenure, and an audit of those accounts in such manner as it thinks fit.

Reading the powers of a company liquidator therefore means reading them with their three limits attached: the Tribunal's overall control under section 290(2), the directions of creditors and contributories under section 292, and the sanction requirement under section 343 for the three acts that settle debts rather than realise assets. The powers run until the affairs are completely wound up, at which point section 302 turns the file into a dissolution order.

Flock reports the filings themselves, each stamped with its date and linked back to the exchange or regulator that published it. What any of it means for you is your call to make.