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Meeting of Creditors

Meeting of Creditors – Companies Act, 2013

Meeting of Creditors – Companies Act, 2013

Meeting of creditors is a term used to denote a meeting setup by the company to formulate a scheme for arrangement with its creditors. The Companies Act, 2013 not only gives powers to the company to negotiate with the creditors but also lays down the process of doing so. Creditors meeting are also organized in the case of creditor’s voluntary winding up. In this article, we look at the process and procedure for calling for a meeting of creditors. 

Notice of Meeting of Creditors

In case of voluntary winding up of company, the company must call for a meeting of creditors on the day or the day next following the day, on which there is to be conducted the general meeting of the company at which the resolution for voluntary winding up is to be proposed.  The notice for meeting of creditors is to be sent by post to the creditors at the same time with the sending of the notices related to the general meeting of the company for voluntary winding up.

In addition to sending of the notice for meeting of creditors by post, the company must also cause to be advertised one time at least in the Official Gazette and one time at least in two newspapers circulating in the district where the registered office or principal place of business of the company is situated.

Sample Format of Notice of Meeting of Creditors

The following format can be used for calling for meeting of creditors:

NOTICE OF MEETING OF CREDITORS

Notice is hereby given that, a meeting of the creditors of Company Name will be held at Company Address on the Date and Time of Meeting of Creditors.

The winding up of the company commenced on the Date of Commencement of Winding Up of Company and I was appointed liquidator by resolution of the members of the company. As the directors declared that the company would be able to pay its debts in full within a period of Time for Payment of Debts after the commencement of the winding up, the liquidation is proceeding as a members’ voluntary winding up.

I have formed the opinion that the company will not be able to pay or provide for the payment of its debts in full within that period and this meeting is summoned in order that the creditors may, if they so wish, exercise their right, to appoint some person other than myself to be the liquidator of the company for the purpose of winding up the affairs and distributing the assets of the company.

A statement of the assets and liabilities of the company will be laid before the meeting.

Procedure for Conducting Meeting of Creditors

At the meeting of creditors, the Board of directors of the company must present a statement of the position of the company affairs jointly with a list of the creditors of the company and the projected amount of their claims. It is the duty of the appointed director to be in charge of at the meeting of creditors to attend the meeting and preside at the same.

Based on the decision of the two-thirds in value of creditors of the company, the next course of action on winding up of the company would be decided as follows:

  • If it is in the interest of all parties so as to the company be wound up on a voluntary basis, then the company will be wound up voluntarily; or
  • If the company may not be able to pay for its debts in full from the assets proceeds sold in voluntary winding up, then a resolution can be passed for winding up of the company by a Tribunal.

The notice of any resolution that is passed at a meeting of creditors must be filed with the Registrar within a period of 10 days of passing. If a company contravenes to the provisions related to this section, the company will be punishable with fine which will not be less than fifty thousand rupees but which may perhaps extend to Rs. two lakh and the director of the company who is in default will be punishable with imprisonment for a term which could extend to six months or with fine which will not be lesser than Rs. 50,000 but which may perhaps extend to Rs. 2 lakh, or with both.

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