Statement of Affairs in Winding Up: Section 274

A statement of affairs in winding up is the company's own account of what it owns and owes, filed once a winding up petition is before the Tribunal. Section 274 of the Companies Act, 2013 sets the trigger, the thirty day clock, the consequence of missing it and the penalty. The consequence is the part worth reading twice: a company that does not file forfeits the right to oppose the petition at all.

When is a statement of affairs in winding up directed, and by whom?

By the Tribunal, and only after a threshold is crossed. Section 274(1) applies Where a petition for winding up is filed before the Tribunal by any person other than the company. In that case the Tribunal shall, if satisfied that a prima facie case for winding up of the company is made out, by an order direct the company to file its objections along with a statement of its affairs within thirty days of the order in such form and in such manner as may be prescribed.

Three things are bundled in that sentence. The direction is conditional on a prima facie finding, so it is not automatic on filing. The objections and the statement of affairs go in together, as one response rather than two. And the clock runs from the date of the order, not from the date of the petition.

The company's own petition is handled elsewhere and earlier. Section 272(4) states that a petition presented by the company shall be admitted only if accompanied by a statement of affairs in such form and in such manner as may be prescribed, so a company that petitions for itself files the statement at the door rather than on direction.

Can the deadline be extended, and can the petitioner be made to pay?

Both, and each is a proviso to the same sub-section.

The first proviso reads that the Tribunal may allow a further period of thirty days in a situation of contingency or special circumstances. The extension is discretionary, is a fixed thirty days rather than an open ended one, and is tied to a named reason.

The second proviso points the other way, at the person who started it. The Tribunal may direct the petitioner to deposit such security for costs as it may consider reasonable as a precondition to issue directions to the company. Security is therefore a precondition to the direction itself, which means it is decided before the company's thirty day clock starts. That matters where the petitioner is a contributory rather than the Registrar, since the grounds for winding up are open to contributories on the general list in section 272(1).

What does a company lose by not filing?

Its defence. Section 274(2) is short and carries two consequences in one sentence: A company, which fails to file the statement of affairs as referred to in sub-section (1), shall forfeit the right to oppose the petition and such directors and officers of the company as found responsible for such non-compliance, shall be liable for punishment under sub-section (4).

The forfeiture attaches to the company. The punishment attaches to individuals, and only to those found responsible for such non-compliance, which is a narrower class than every director on the board. Note that sub-section (2) routes that punishment to sub-section (4), while sub-section (4) is written against any director or officer who contravenes the provisions of this section, a wider trigger than the sub-section (1) default alone.

What happens to the books of account after the order?

A second, separate filing duty starts. Section 274(3) applies to the directors and other officers of the company, in respect of which an order for winding up is passed by the Tribunal under clause (d) of sub-section (1) of section 273. They shall, within a period of thirty days of such order, submit, at the cost of the company, the books of account of the company completed and audited up to the date of the order, to such liquidator and in the manner specified by the Tribunal.

Read the three qualifiers in that duty. The books must be completed and audited, not merely handed over as they stand. The audit is at the cost of the company, not of the directors. And the cut off is the date of the order, which is the same date from which the thirty days run. The books go to such liquidator and in the manner specified by the Tribunal, and once they are there the liquidator's custody and powers govern what happens to them.

The statement of affairs does not stop being useful once it is filed. Section 277(5)(ii) puts examination of the statement of affairs among the liquidation functions the winding up committee assists and monitors, alongside taking over assets and finalisation of the list of creditors and contributories, which is part of the effect of the winding up order itself.

Who prosecutes a default, and where?

Section 274(5) names the forum and the complainants: The complaint may be filed in this behalf before the Special Court by Registrar, provisional liquidator, Company Liquidator or any person authorised by the Tribunal.

Four possible complainants, and a Special Court rather than the Tribunal, for a penalty set by section 274(4) at imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees, or with both. Both the floor and the ceiling on the fine are stated. Several other penalties in the Act name only a ceiling.

Reading a statement of affairs in winding up therefore means checking who petitioned, since that decides whether the statement comes in with the petition or on direction; when the Tribunal's order issued, since the thirty days run from it; and whether an extension or a security direction changed either date. A company that lets the period lapse is not merely late. Under section 274(2) it has given up the right to argue the petition.

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.