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  • Writer's pictureManasa M

Section 297- Adjustment of Rights of Contributories

Updated: Oct 13, 2022

#section297 #companiesact2013 #company #liquidator #liquidation #law #windingup #contributories

To understand this Section, let us go through a few terms.

  • A contributory is a person who is liable and responsible to contribute to the assets of a company when it is in the winding up stage. A contributory may be a member or shareholder of a company. The use of the word ‘contributory’ arises only during the period of winding up of a company.

  • Unless the court allocates with the list of contributories for settlement, the Company Liquidator prepares the list of contributories. In case the name of the shareholder falls in the list of contributories then, he becomes liable to pay only such amount which has so far not been called and paid by him on the shares held by them. To save himself from paying the amount, he has to prove that his name has been wrongly included in the list of contributories.

  • A list of contributories is prepared where the present members are placed under List A who are primarily liable whereas the past members whose liability is secondary is placed in List B. But a person who has fully paid-up capital cannot be placed in any list of the contributories. But such person holding fully paid-up shares has to enjoy all the rights of a contributory without attracting liability to make any contribution to the assets of the company during winding up. Such holder of fully paid-up shares can participate in the distribution of residual assets of the company that is left out after meeting all its liabilities.

According to Section 297 of The Companies Act, 2013,

The Tribunal shall adjust the rights of the contributories among themselves and distribute any surplus among the persons entitled thereto.

As per this Section,

If there is any surplus amount left (i.e., the excess amount that remains when the debts are paid) will be distributed and also the rights of the contributories will be adjusted among themselves and also by the persons who are entitled by the tribunal.

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