305. Declaration of solvency in case of proposal to wind up voluntarily
(1) Where it is proposed to wind up a company voluntarily, its director or directors,
or in case the company has more than two directors, the majority of its directors, shall, at a
meeting of the Board, make a declaration verified by an affidavit to the effect that they have
made a full inquiry into the affairs of the company and they have formed an opinion that the
company has no debt or whether it will be able to pay its debts in full from the proceeds of
assets sold in voluntary winding up.
(2) A declaration made under sub-section (1) shall have no effect for the purposes of
this Act, unless—
(a) it is made within five weeks immediately preceding the date of the passing of
the resolution for winding up the company and it is delivered to the Registrar for
registration before that date;
(b) it contains a declaration that the company is not being wound up to defraud
any person or persons;
(c) it is accompanied by a copy of the report of the auditors of the company
prepared in accordance with the provisions of this Act, on the profit and loss account
of the company for the period commencing from the date up to which the last such
account was prepared and ending with the latest practicable date immediately before
the making of the declaration and the balance sheet of the company made out as on
that date which would also contain a statement of the assets and liabilities of the
company on that date; and
(d) where there are any assets of the company, it is accompanied by a report of
the valuation of the assets of the company prepared by a registered valuer.
(3) Where the company is wound up in pursuance of a resolution passed within a
period of five weeks after the making of the declaration, but its debts are not paid or provided
for in full, it shall be presumed, until the contrary is shown, that the director or directors did
not have reasonable grounds for his or their opinion under sub-section (1).
(4) Any director of a company making a declaration under this section without having
reasonable grounds for the opinion that the company will be able to pay its debts in full from
the proceeds of assets sold in voluntary winding up shall be punishable with imprisonment
for a term which shall not be less than three years but which may extend to five years or with
fine which shall not be less than fifty thousand rupees but which may extend to three lakh
rupees, or with both.