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.
