Company Law and Practice · Board Composition and Powers of the Board

Cessation of Board's Powers on Appointment of Liquidator

Updated 11 October 2026 · Fact-checked

Once a liquidator is appointed in winding up, control of the company's affairs moves from the Board to the liquidator. Directors keep only what the liquidator or Tribunal allows. The old rule sat in Section 313 of the Companies Act, 2013, which is now omitted. For Tribunal winding up, read Sections 275, 277 and 290.

Understand Cessation of Board's Powers on Appointment of Liquidator

A company acts through its Board. Once the company is being wound up, its business is no longer run for growth. Its assets are collected, sold and paid out to creditors. So someone independent must take charge. That person is the liquidator.

The principle is simple. When a liquidator takes charge, the directors' powers to manage the company cease. They continue only to the extent the liquidator (or the Tribunal) permits. This protects creditors and contributories from directors dealing with assets that must be distributed.

The Act text matters here. Section 313 (Cesser of Board's powers on appointment of Company Liquidator) has been omitted by the Insolvency and Bankruptcy Code, 2016 (w.e.f. 15-11-2016). Do not quote it as a live provision. Voluntary winding up is now handled under the Insolvency and Bankruptcy Code, 2016, not under the old Companies Act provisions. Section 314 (powers and duties of liquidator in voluntary winding up) is omitted for the same reason.

For winding up by the Tribunal, the live provisions are these. Section 275: the Tribunal appoints the Company Liquidator at the time of the winding up order, from insolvency professionals registered under the Code. Section 290: the Company Liquidator carries on the business only as far as necessary for beneficial winding up, sells assets, settles claims and acts in the company's name, all under the Tribunal's overall control. Section 277(3): the winding up order is deemed a notice of discharge to officers, employees and workmen, except when the business is continued.

So in an answer, explain the principle (powers pass to the liquidator, directors act only with permission), then support it with these sections and note that Section 313 is omitted.

Key rules to remember

Core principle: Liquidator appointed → Board's management powers cease → directors act only if liquidator/Tribunal permits; State this as the principle. It reflects the old Section 313 idea and the liquidator's role under Section 290. Do not cite Section 313 as in force.
Status of Section 313: Section 313 = omitted (w.e.f. 15-11-2016); Omitted by Section 255 and the Eleventh Schedule of the Insolvency and Bankruptcy Code, 2016. Section 314 is omitted likewise.
Appointment of liquidator (Section 275): Tribunal appoints Company Liquidator at the time of winding up order, from registered insolvency professionals; The liquidator must file a declaration of conflict of interest within seven days of appointment.
Liquidator's powers (Section 290): Powers exercised subject to directions and overall control of the Tribunal; They include carrying on business as necessary, selling property, raising money on assets, and instituting or defending suits in the company's name.
Effect on staff (Section 277(3)): Winding up order = notice of discharge to officers, employees and workmen, unless business is continued; Applies to Tribunal winding up.
Time limits (Section 277): Intimation to liquidator and Registrar: within 7 days of order | Application for winding up committee: within 3 weeks of order; The committee has the Official Liquidator, a secured creditors' nominee and a Tribunal-nominated professional.
Sanction needed (Section 343): Paying a class of creditors in full, or compromising claims → needs Tribunal sanction; The liquidator himself is controlled by the Tribunal for these acts.

How to solve Cessation of Board's Powers on Appointment of Liquidator questions

Use this method for any question on what happens to the Board's powers once a liquidator is appointed.

1Identify the mode of winding up: by the Tribunal, or voluntary (now under the Insolvency and Bankruptcy Code, 2016).
2State the principle: on the liquidator's appointment, the Board's powers to manage cease, and directors act only with permission.
3Check which section is live. Section 313 and Section 314 are omitted. For Tribunal winding up, use Sections 275, 277, 290 and 343.
4Apply the facts: who appointed the liquidator, when, and what act the directors or liquidator did.
5Test each act: is it within the liquidator's powers under Section 290, and does it need Tribunal sanction under Section 343?
6Mention effects on staff (Section 277(3)) and timelines (Section 277) if the facts raise them.
7Conclude clearly: whether the directors' act was valid, and who now holds the power.

Quickest way: Principle, status, section, conclusion

When to use it: Short-answer questions of 4-5 marks or when time is short.

Line 1: powers of the Board cease on the liquidator's appointment, except as the liquidator or Tribunal permits.
Line 2: note that Section 313 is omitted w.e.f. 15-11-2016 by the Insolvency and Bankruptcy Code, 2016.
Line 3: cite Section 290 (liquidator's powers under Tribunal control) and Section 277(3) (discharge of staff).
Line 4: apply the facts and give a one-line conclusion.

Common mistakes in Cessation of Board's Powers on Appointment of Liquidator

Quoting Section 313 as a current provision.
Older books and the topic name still refer to it.
Fix: Say it is omitted w.e.f. 15-11-2016 and rely on Sections 275, 277 and 290 for Tribunal winding up.
Saying directors cease to hold office the moment a liquidator is appointed.
Confusing loss of powers with loss of office.
Fix: Write that their management powers cease. Do not claim they are automatically removed unless the question says so.
Saying the winding up order always dismisses employees.
Reading Section 277(3) without its exception.
Fix: The order is deemed a notice of discharge except when the business of the company is continued.
Treating the liquidator's powers as unlimited.
Forgetting the control provisions.
Fix: Section 290(2) puts the liquidator under the Tribunal's overall control, and Section 343 requires sanction for certain acts.
Mixing up the time limits of 7 days and 3 weeks.
Both appear in Section 277.
Fix: Seven days is for the Tribunal's intimation to the liquidator and Registrar. Three weeks is for the liquidator's application for a winding up committee.
Applying Section 378R (powers of a Producer Company's Board) to liquidation.
Seeing 'powers of Board' in the same Act.
Fix: Section 378R deals with the Board of a Producer Company in going-concern operation. It is not the rule on cessation in winding up.

Worked examples

Example 1

Rajat Textiles Ltd is being wound up. A student writes that under Section 313 the Board's powers cease on the liquidator's appointment. Comment on this answer.

Show the solution

The principle is correct in substance: once a liquidator takes charge, the Board's management powers cease except as permitted.
But Section 313 has been omitted by Section 255 and the Eleventh Schedule of the Insolvency and Bankruptcy Code, 2016, w.e.f. 15-11-2016.
So the answer should not rely on it as a live section.
For winding up by the Tribunal, rely on Section 275 (appointment of the Company Liquidator), Section 290 (powers of the liquidator under the Tribunal's control) and Section 277(3) (discharge of staff).
Voluntary winding up now falls under the Insolvency and Bankruptcy Code, 2016.

Answer: The principle is right but the citation is wrong. Section 313 is omitted. For Tribunal winding up, cite Sections 275, 277 and 290 instead.

Example 2

The Tribunal passes a winding up order against Meghna Foods Ltd on 10 March 2027 and appoints a Company Liquidator. The directors want to sell the factory. The company's business is not being continued. Advise on the powers, the staff and the time limits.

Show the solution

The Tribunal appoints the Company Liquidator at the time of the winding up order (Section 275(1)). He must be an insolvency professional registered under the Code (Section 275(2)).
The power to sell immovable and movable property by public auction or private contract belongs to the Company Liquidator under Section 290(1)(c), subject to the Tribunal's control. The directors' management powers have passed to him, so the directors cannot sell on their own.
Under Section 277(3), the winding up order is deemed a notice of discharge to officers, employees and workmen, as the business is not continued.
Under Section 277(1), the Tribunal must cause intimation to the liquidator and the Registrar within seven days, i.e. by 17 March 2027.
Under Section 277(4), the liquidator must apply for a winding up committee within three weeks of the order. Three weeks is 21 days, so by 31 March 2027.

Answer: The factory can be sold only by the Company Liquidator under Section 290(1)(c), not by the directors. The staff are deemed to be given notice of discharge. Intimation is due by 17 March 2027 and the winding up committee application by 31 March 2027.

Exam tips

Begin with the principle, then say Section 313 is omitted. This shows you know the current law.
Learn Sections 275, 277, 290 and 343 together. Examiners test the liquidator's role around them.
Memorise the two time limits: seven days for intimation and three weeks for the winding up committee application.
Use the words 'subject to the control of the Tribunal' when describing the liquidator's powers.
End each answer with a clear conclusion on who holds the power and whether the act was valid.

Practice questions from Board Composition and Powers of the Board

Cessation of Board's Powers on Appointment of Liquidator in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CS ProfessionalAppointment and Powers of Liquidator

Cessation of Board's Powers on Appointment of Liquidator: frequently asked questions

Do the directors' powers really cease when a liquidator is appointed?

Their management powers pass to the liquidator, who runs the winding up under the Tribunal's control. Directors act only where the liquidator or Tribunal permits. Write it as a loss of powers, not automatically a loss of office.

Is Section 313 of the Companies Act, 2013 still in force?

No. It has been omitted by Section 255 and the Eleventh Schedule of the Insolvency and Bankruptcy Code, 2016, with effect from 15-11-2016. Section 314 is omitted too.

Who appoints the Company Liquidator in winding up by the Tribunal?

The Tribunal appoints him at the time of passing the winding up order. Under Section 275(2) he is chosen from insolvency professionals registered under the Insolvency and Bankruptcy Code, 2016.

What happens to employees when a winding up order is passed?

Under Section 277(3), the winding up order is deemed a notice of discharge to the officers, employees and workmen of the company. The exception is where the business of the company is continued.