2. Compromise is an agreement terminating a dispute
between parties as to the power to enforce rights or as to
what those rights are .as a term “compromise” means
amicable settlement of a dispute or controversy by the
methods of making mutual concession.
The term arrangement is wider in scope and is not
limited to compromise alone According to section 309(b)
of the companies act ,1956, “an arrangement includes
reorganization of the share capital of the company by the
consolidation of shares of different classes or by division
of shares of different classes or by both methods.
3. The procedure of the compromise and arrangements
can be discussed under the following heads-
Compromise when the company is a going
concern(sec 391-393).
Meeting of creditors or members[sec 391(1)].
Approval of the schemes.
Sanction by the courts[sec(391)]
Copy of court’s order to be filed with the
registrar[sec391(3)].
Copy of court’s to be annexed to memorandum.
Stay of suits or proceeding against the company
[sec391(6)] .
4. The term re-construction implies the process
followed for re-organization of a company
with respect to its capital structure including
the reduction of claims of both the
shareholders and the creditors of the
company.
5. There are two types of re-construction are as
follows-
External re-construction-the winding up of
an existing company and registering itself
into a new one after a rearrangement of its
financial position.
Example-Golden tea co. ltd. was taken over
by a newly formed ‘New golden tea co. ltd.’
6. Internal re-construction-it means a recourse
undertaken to make necessary changes in the
capital structure of a company without
liquidating the existing company. Under it,the
accumulated trading losses and fictitious
assets are written off against the sacrifice
made by these interest holder in the form of
reduction of paid-up value of their interest.
7. The steps are as follows-
Estimation of loss
Writing-off the loss
Compensating the parties
Arrears of preference dividend
Additional working capital
Funds for fixed assets
8. According to Lord Cooper-the essence of the
matter seems to be that the conduct
complained of should the lowest involve a
visible departure from the standards of fair
dealing and a violation of the conditions of
fair play on which every shareholder who
entrusts his money to the company is entitled
to rely.
9. Section 397 of the act deals with the concept of
oppression. These are basically two very
important ingredients involved-
Affairs of the company are conducted in a
manner prejudicial to the public at large. Or
oppressive to any member therein.
To wind up the company would result in unfairly
prejudicing the members, but the facts and
circumstances otherwise suggest that the
winding up of the company would be the right
course of action.
10. Section 398, in dealing with the concept of
mismanagement also highlights two basic
concepts that the affairs of the company are
being conducted or such affairs are likely to
be conducted in a manner which is-
Prejudicial to public interest
Prejudicial to the interest of the company
11. The company law board may give relief if it is of
opinion-
That the affairs of the company are being
conducted in a manner prejudicial to the public
interest or the interest of the company
That by the reason of a material change in the
management or the control of the company , the
affairs of the company is likely to be conducted
in a manner prejudicial to the public interest or
the interest of the company.
12. 1. Companies having share capital
Not less than 10 members or 1/10 of the total
number of its members , whichever is less.
By any members holding not less than 1/1of the
issued share capital.
2. Companies not having share capital
1/5 of the total number of the company.
3. The central government or any person
authorized by the central government.
4.Trustees of a shareholder
5. A legal representative of a deceased member.
13. • Winding up/liquidation represents the last
stage in company’s life.
• It is a proceeding by which a company is
dissolved.
• The company’s assets are disposed of , the
debts are paid off out of the realized assets ,
and the surplus , if any is then distributed
among the members in proportion to their
holdings in the company
14. There are two modes of winding up of a
company.
Winding up by theTribunal
Voluntary winding up which may be
(a) members’ voluntary winding up OR
(b) creditors’ voluntary winding up
15. The is also known as compulsory winding up
and a company may be wound up in the
following cases.
Special resolution of the company
Default in delivering the statutory report to
the Registrar
Failure to commence/suspension of business
Reduction in membership
Inability to pay its debts
Just and equitable
16. Voluntary winding up means winding up by the
members or creditors of a company without
interference by theTribunal.
A company may be wound up voluntarily:
By passing an ordinary resolution
By passing a special resolution
Commencement of voluntary winding up
Advertisement of resolution
17. A voluntary winding up may be a:
Members’ voluntary winding up
Creditors’ voluntary winding up
members’ voluntary winding up
Declaration of solvency
Provisions applicable
Creditors’ voluntary winding up
Meeting of creditors
Notice of resolution to be given to Registrar
Appointment of liquidator
Appointment of committee of inspection
Liquidator’s remuneration
Board’s power to cease on appointment of liquidator
Power to fill vacancy in office of liquidator
Duty of liquidator to call meeting at the end of each year
Final meeting and dissolution
18. Consequences as to shareholders/members
Consequences as to creditors
Preferential payments
Consequences as to servants and officers
Consequences as to proceedings against the
company
Consequences as to costs
