Winding up of a Company

What Is Winding Up?

The process of winding up involves gathering and selling the company's assets in order to pay off any outstanding obligations. When a corporation is wound up, debts, expenditures, and charges are originally paid off and distributed among the shareholders.

The Company officially dissolves after being liquidated and ceases to exist.

The legal process of winding up allows a corporation to close its doors and stop all ongoing operations. After the Company winds up, its existence ends, and the assets are watched over to ensure that the interests of the stakeholders are not compromised.

A Private Limited Company is an artificial legal entity that is subject to a number of requirements. If the company does not uphold these requirements, it may be subject to fines, penalties, or even disqualification of the Directors from incorporating more companies. It is always preferable to dissolve a business that has ceased operations or has no transactions.

The Company's shareholders may decide to dissolve the business at any moment. All outstanding debts must be paid regardless of whether there are employees, secured or unsecured creditors, or both. Following the settlement of debts, all corporate bank accounts must be closed. If the Company is dissolved, the GST registration must also be cancelled.

After giving up all registrations, the petition for winding up may be presented to the Ministry of Corporate Affairs.

Types of Company windup

What are the different ways in which an individual can windup a Company?

A company may be dissolved in one of two ways:

1. Voluntary winding up of a Company
2. Compulsory winding up of a company

1. Voluntary Winding up of a Company

Members of a company may choose to wind it up on their own accord if:

• The company adopts a unique resolution to dissolve the company.
• A resolution adopted by the company's general meeting requires a company to dissolve itself voluntarily when its duration expires, as required by the articles of association, or in response to the occurrence of any circumstance for which such dissolution is called for by the articles of association.

Procedure for Voluntary winding up of a Company

• Call a board meeting with the directors, at which a resolution should be passed with a declaration from the directors that they have looked into the company's affairs and that there are no debts, or that the company will pay from proceeds from the sale of its assets in the voluntary winding up of the company.
• To call for the company's annual general meeting and propose the resolutions, written notices must be delivered together with an appropriate justification.
• Pass the regular resolution for the Company's dissolution at the annual meeting with an ordinary majority or a special resolution with a 3/4 majority. Beginning on the day the resolution was passed, the company will be wound up.
• On the same day or the day after the decision for the winding up is passed, a meeting of the creditors must be held. The company may be voluntarily wound up if the opinions of two-thirds of its creditors that it is in everyone's best interest to do so prevail.
• A notice for the appointment of a liquidator must be submitted to the registrar within 10 days of the company winding up resolution being approved.
• 30 days after the general meeting for the company's winding up, the certified copies of any special or ordinary resolution adopted at the general meeting for that purpose.
• It is necessary to wind up the business's affairs and create and audit the liquidators account of the winding-up account.
• Call for the company's last general meeting.
• When the business of the company is entirely wound up and it is ready to be dissolved, a specific resolution should be enacted for the disposal of the books and documents of the company.
• File a copy of the accounts, along with the application for the tribunal to issue an order for the dissolution of the business, within two weeks following the company's annual general meeting.
• Following receipt of the application, the tribunal has 60 days to issue an order dissolving the corporation.
• The company liquidator shall file a copy of the order with the registrar.
• Upon receiving a copy of the Tribunal's order, the registrar will subsequently issue a notice that the Company has been dissolved in the official gazette.

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 legal organization created in accordance with the Companies Act is a private limited company. Therefore, throughout its life cycle, a corporation must keep its regular compliances.

For a company that is not functioning and wants to avoid compliance obligations, the winding-up process is used.

Within three to six months, a request to close a business must be made to the minister of corporate finances. This entire process can take place online. If done through Indiafilings, closing a corporation is a quick and simple process.

If a firm doesn't submit its compliances on time, it will be fined and penalized, and its directors will be barred from founding new companies. In order to avoid future fines or liabilities, it is preferable to dissolve an inactive corporation.

It is actually to wind up a corporation again when the moment is perfect, as opposed to keeping compliances for a dormant firm. Winding up is possible with Indiafilings for just Rs.

A corporation that complied with all regulations can be readily liquidated. If there are any unpaid complaints, they must first be regularized. However, it should be remembered that all registrations must also be given up.