There are following six reasons for the compulsory winding up of the joint stock company:

1. Special resolution

A company may be wound up by the court if a special resolution is passed for this Purpose.

2. Failure to commence business

When the company does not commence business within a year from its incorporation or suspends business for a year.

3. Statutory report or meeting

Where default is made in submitting the statutory report to the registrar's office or in holding the statutory meeting within prescribed time or any two consecutive annual general meetings under section 305 (b) in company ordinance 1984.

Reading: Businesses

4. Reduction in number of members

Where the number of members of public company is reduced below seven or in case of private company below two.

5. Inability to pay its debts

Where the company is unable to pay its debts in the following situation. 
  • If a creditor whose debt exceeds. Rs.50,000 or one percent of its paid up capital which ever is less under section 306 (a) Has served notice requiring payment and is not paid within 30 days.
  • If execution in favour of creditor remains unsatisfied or
  • If the court is fully satisfied that the company is quite unable to pay its debts.

6. Court's decision

When the court is of the opinion that it is just and equitable that the company should be wound up due to its mismanagement, dead-lock, fraudulent or any other reasonable grounds.

The circumstances of such winding up

Expiry of fixed period

Where the period is fixed for the duration of the company by the Articles, it. may be winding up on the expiry of period. But the company has to pass ordinary resolution in general meeting to wind up.

Happening of event

A company may be wound up on the happening of event on which (under the Articles) the company is to be dissolved.

Special resolution

A company may be wound up voluntarily if the company passes special resolution for this purpose.

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Heavy liabilities

A company may be wound up if the company passes extra-ordinary resolution that it cannot continue its business due to its heavy liabilities.

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