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Winding up of a Company
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Winding up of a Company
What Is Winding Up?
Winding up is the liquidation of the Company’s assets which are collected and sold in order to pay the debts incurred. When the company winding up takes place firstly the debts, expenses and costs are paid away and distributed among the shareholders.
Once the Company is liquidated it is formally dissolved and the Company ceases to exist.
Winding up is the legal mechanism to shut down a company and cease all the activities that are carried on. After the Company winding up the existence of the Company comes to an end and the assets are monitored so that the stakeholder’s interest is hampered.
A Private Limited Company is an artificial judicial person and requires various compliances if the company fails to maintain these compliances there are fines and penalties or even disqualification of the Directors from further incorporating a Company. It is always better to wind up a company that has become inactive or where there is no transaction.
The shareholders of the Company can initiate the winding up of the company anytime. If there are secured or unsecured creditors or employees on a roll then all the dues need to be settled. After settling the dues, it is necessary to close all the Company bank accounts. The GST registration must also be surrendered in case of Company wind up.
Once all the registration is surrendered the winding up application petition can file with the Ministry of corporate affairs.
Types of Company windup
What are the different ways in which an individual can wind up a Company?
A company can be wound up in two different ways-
- Voluntary winding up of a Company
- Compulsory winding up of a company
1. Voluntary winding up of a Company
The Winding-up of a Company can be done voluntarily by the members of the Company, if:
- The company passes a special resolution for winding up the Company.
- The Company in general meeting passes a resolution which requires a company to wind up voluntarily as a result of the expiry of the period of its duration, any as per the Articles of Association or on the occurrence of any event in respect of which the articles of association provide that the company should be dissolved.
Procedure for Voluntary winding up of a Company
- Convene aboard meeting with the Directors in which a resolution should be passed with a declaration by the directors that they have made an inquiry in the affairs of the Company and the company no debts or the Company will pay from the proceeds of the assets sold in the voluntary wind up of the company.
- Notices should be issued in writing to call for the general meeting of the Company proposing the resolutions, with a suitable explanatory statement.
- Pass the ordinary resolution for winding up of the Company in the general meeting by ordinary majority or special resolution by 3/4 majority. The Winding-up of the Company shall commence from the date of passing the resolution.
- A meeting of the creditors should be conducted on the same day or the next day of passing the resolution regarding winding up. If the 2/3rd value of the creditors are of the opinion that it is in the interest of all parties to wind up the Company, the company can wound up voluntarily.
- Within 10 days of passing the resolution for company winding up, a notice for appointment of the liquidator must be filed with the registrar.
- Within 30 days of the general meeting for the winding up the certified copies of the ordinary or the special resolution passed in the general meeting for the winding up of the Company.
- The affairs of the company need to be wind up and prepare the liquidators to account of the Winding up an account and to get it audited.
- Call for the final General meeting of the Company.
- A special resolution should be passed for the disposal of the books and the papers of the company when the affairs of the company are completely wound up and it is about to be dissolved.
- Within two weeks of the general meeting of the Company, file a copy of the accounts and file and the application to the tribunal for passing an order for the dissolution of the company.
- The tribunal shall pass an order dissolving the company within 60 days of receiving the application.
- The company the liquidator is required to file a copy of the order with the registrar.
- The registrar will then on receiving the copy of the order passed by the Tribunal then publish a notice in the official gazette that the Company is dissolved.
Compulsory winding up of a Private Limited Company
- Tribunal is responsible for this kind of wind up of Companies.
- Here are the reasons for the same:
- Unpaid debts of a Company
- When a special resolution is passed fort winding up
- An unlawful act by a company or the management of the Company
- If the company is involved in fraudulent acts or misconduct
- If the annual returns or financial statements are not filed for five consecutive years with the ROC
- The Tribunal is of the view that the company should windup.
Procedure for compulsory winding up of a Company
- Is to File a petition to the tribunal along with the statement of the affairs of the Company that is to wind up.
- The tribunal will either accept or reject the petition if a person other than the company files a petition then the tribunal may ask the company to file an objection. it goes along with the statement of affairs within 30 days.
- Liquidator needs to be appointed by the tribunal for the winding up process. The liquidator carries out the function of assisting and monitoring the liquidation proceedings.
- Liquidator is supposed to prepare a draft report for approval. when the draft report gets approved he shall submit the final report to the tribunal for passing the winding up order.
- It is necessary of the liquidator to forward a copy to the ROC within 30 days, If he fails to do so then he will get a penalty.
- If the ROC finds the draft satisfactory he then approves the winding up of the Company and the name of the Company is strike off from the register of Companies.
- ROC sends notice for Publication in the official gazette of India
If the subscriber to the Memorandum is a body corporate, then the following particulars must be filed with the registrar
- The corporate identity number of the company or the registration number of the corporate body.
- Global Location Number, which is used to identify the location of the legal entity (optional)
- The name of the body corporate.
- The registered address of the business
- Email address
- If the corporate body is a company, then a certified true copy of the board resolution specifying the authorization to subscribe to the memorandum of association of the proposed company and to invest in the proposed company. The particulars, in this case should include the number of the shares that are to be subscribed by the corporate body as well as the name, address, and designation of the authorized person.
- In case the corporate body is a limited liability partnership or a partnership firm than a certified copy of the corporate, the number of shares proposed to be subscribed in the corporate body, and the name of the authorized partner must be included.
- For the foreign corporate body, the particulars like the certificate of incorporation of the company and the address of the registered office must be included.
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