Statement That a Company Is in Liquidation: S. 344

The statement that company is in liquidation is the smallest disclosure in Chapter XX and the one most likely to reach a counterparty. Section 344 of the Companies Act, 2013 requires every invoice, order for goods and business letter issued while a company is being wound up to say so on its face, and section 344(2) puts a fine behind the omission. This page reads both sub-sections as printed.

What is a statement that a company is in liquidation?

A line on the paperwork, required by statute. Section 344(1) states that where a company is being wound up, whether by the Tribunal or voluntarily, every invoice, order for goods or business letter issued by or on behalf of the company or a Company Liquidator of the company, or a receiver or manager of the property of the company, being a document on or in which the name of the company appears, shall contain a statement that the company is being wound up.

Three elements decide whether a document is caught. It has to be one of the three named types, it has to be issued by or on behalf of one of the four named issuers, and the company's name has to appear on or in it. The final clause is the filter: being a document on or in which the name of the company appears.

Which documents and issuers does section 344 reach?

Trading documents, not filings. The three document types are an invoice, an order for goods and a business letter. The four issuers are the company itself, anyone acting on its behalf, the Company Liquidator, and a receiver or manager of the property of the company.

The section does not prescribe wording, placement or type size. It requires only that the document shall contain a statement that the company is being wound up, which leaves the form of words to whoever issues it.

Who is punishable, and what is the fine?

The company and four categories of person, on different terms. Section 344(2) states that if a company contravenes the provisions of sub-section (1), the company, and every officer of the company, the Company Liquidator and any receiver or manager, who wilfully authorises or permits the non-compliance, shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees.

Read where the qualifier sits. The words who wilfully authorises or permits the non-compliance follow the list of persons, so wilfulness attaches to them; the company is named first and separately. The penalty is a fine with both a floor and a ceiling, and no imprisonment limb.

Has section 344 been amended?

No. Section 344 is printed without square brackets and without a footnote marker on either sub-section, so both the requirement and the fine stand as enacted in 2013. That is worth stating because the sections printed around it in the same Chapter do carry markers: section 343(1) was substituted by Act 31 of 2016, section 255 and the Eleventh Schedule with effect from 15 November 2016, and section 347(1) was substituted by the same provision.

Section 344 also differs from the rest of the liquidation disclosure machinery in who receives it. The Registrar and the Tribunal receive filings under other sections, such as the periodic statement on a pending liquidation. Section 344 speaks to a supplier reading an order, or a customer reading an invoice, before deciding whether to deal with the company at all.

That is why a statement that company is in liquidation matters more than its length suggests. Alongside it, section 345 makes the company's books prima facie evidence between contributories, covered in company books as evidence in a winding up, and section 346 sets the terms on which creditors and contributories may inspect those books. Together those three sections decide what an outsider can see about a company in winding up.

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.