Winding up is the liquidation of 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 exists.
Winding up is the legal mechanism to shut down a company and cease all the activites that re carried on . After the Company winding up the existence of the Company comes to an end and the assets are monitored so that the stakeholders interest is not 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 a better to wind up a company that has become inactive or where there are 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 roll then all the dues need to be settled. After settling the dues it is necessary to close all the Compamny bank accounts. The GST registration must also be surrendered in case of Company wind up.
Once all the registration are surrendered the winding up application petition can filed with the Ministry of corporate affairs.
Types of Company windup
What are the different ways in which an individual can windup 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 a board meeting with the Directors in which a resolution should be passed with a declaration by the directors that they have made an enquiry in the affairs of the Company and the company no debts or the Company will pay from the precedes 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 generally 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 interest of all parties to windup the Company, the the Company can wound up voluntarily.
- Within 10 days of passing the resolution for company winding up , a notice for appointment of 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 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 account of the Winding up 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 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.
2. 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
Step:1 Is to File a petition to the tribunal along with the statement of the affairs of the Company that is to wind up.
Step:2 The tribunal will either accept or reject the petition if the person other than company files a petition then the tribunal may ask the company to file objection. it goes along with the statement of affairs within 30 days.
Step:3 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.
Step:4 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.
Step:5 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.
Step:6 If the ROC finds the draft satisfactory he then approves the winding up of the Company and the name of the Company is striked from the register of Companies.
Step:7 ROC sends notice for Publication in the official gazette of India
Top reasons why companies wind up
What are the top reasons why Companies windup ?
A private Limited Company is a legal entity established under the Companies Act. Therefore, a company is required to maintain the regular compliances throughout the life cycle.
The process of winding up is for a Company that is not active and avoid the compliance responsibilities.
A company can also be closed by filing an application with the ministry of corporate finances in about 3 to 6 months. This process can happen online enitrely. The process for closing a company is fast and easy if done through Indiafilings.
If a company doesn’t file the compliances on time incurs fine and penalty including debarring the Directors from starting another Company. In that way it is better to windup a company that is inactive and avoid the potential fines or liability in future.
As compared to the maintainance of compliances for a dormant company it is actually to be wind up a company again when the time is right. With Indiafilings winding up is can be done just at Rs.15899
A company that maintained proper compliances can be liquidated easily. Incase of any over dues of complainces it is necessary to regularize them first. However, it is tonbe noted thata all the registartions aslo need to be surrendered.
