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.