Winding Up of a Company

Winding up of a company is an important procedure, it denotes the end of a business's activities and the beginning of its dissolution. Contact Us! to close your company without any hassle

• Legal consultation and guidance throughout the winding-up process
• Preparation and filing of necessary documentation with regulatory authorities
• Handling financial matters
• Representation in court proceedings or other legal matters related to the winding-up process
• PEnsuring compliance with all legal and regulatory requirements for the orderly dissolution of the company

Winding up of a Company: A Comprehensive Guide

In the corporate world, winding up of a company is an important procedure. It denotes the end of a business’s activities and the beginning of its dissolution. A company’s dissolution is a crucial event in the life cycle of any business. Whether voluntary or mandatory, it requires a number of legal, financial, and administrative measures that must be carefully considered and followed. Understanding the reasons for dissolution, the procedures involved, and the legal requirements is critical for business owners, creditors, and stakeholders. This understanding enables them to manage the process efficiently and make educated judgments about the company’s future. This page will offer a thorough examination of the many facets of winding up of a company, illuminating the reasons, strategies, and legal processes involved in this momentous undertaking.

What are the different ways of winding up of a company?

1. According to the Companies Act of 2013, the process of winding up of a Company has been divided into following ways

• Strike off a company
• Winding up of the company

2. The process of winding up has been further subdivided into two parts; according to Section 270, a company can be wound up in the following ways:

• Compulsory Winding up of Company by Tribunal
• Voluntary Winding up of the Company

What is compulsory winding up of a company?

When a company is required by law to wind up its operations, this is referred to as compulsory winding up or winding up by a Tribunal. The Tribunal refers to the National Company Law Tribunal in this context. This can be decided in a court of law or in the form of a court order. In the above instance, the company is compelled to appoint a liquidator. The liquidator will be in charge of managing the sales of the company and all of its assets, as well as distributing all assets following the liquidation among all creditors.

Winding up of a Company by the order of the tribunal

According to Section 271 of the Companies Act, a Tribunal has complete authority to make a winding-up order, but only in the following conditions. The circumstances are as follows:

• 1: Bypassing of special resolution for winding up;
• 2: Inability to pay debts;
• 3: Deadlock in management;
• 4: Sick Company;
• 5: Acts against the State;
• 6: Fraudulent Conduct of Business;
• 7: In case the company fails to file financial statements with the Registrar;
• 8: If it seems just, reasonable and equitable to wind up.

Who can all file the petition for winding up of a Company by tribunal?

1. According to Section 272 of the Companies Act of 2013, the following individuals may petition the Tribunal for winding up of a company:

• The Company, as defined in Section 272(5) of the Companies Act;
• Any creditor(s) or potential creditor(s) of the company;
• Any Contributors to that company, as defined in Section 272(3) of the Companies Act;
• The Registrar.

2. Before submitting the petition for the company to be wound up, the Registrar must first receive approval from the Central Government. Furthermore, before giving the Registrar such authorization, the Central Government must provide a reasonable opportunity to the company. The petition must be filed in copy form to the Registrar, who has sixty (60) days to review it and provide the Tribunal with his opinion.

• By the Central Government or the State Government directly, if the company is operating against the interests of India’s sovereignty and integrity;
• By any individual that the Central Government grants permission to do so.

Stages involved in the process of winding up of a company by tribunal

The process for a tribunal for winding up of a company involuntarily is as follows:

• Section 275 of the Companies Act mandates that the company designate a liquidator. In order to determine if the company qualifies for a mandatory wind-up by the tribunal, the liquidator will need to review the company’s debts and credits.
• The liquidator will then be required to submit a report to the tribunal in accordance with Section 281 of the Act
• The tribunal then orders the liquidator to begin the process of dissolving the company in accordance with Section 281 of the Companies Act, 2013 after reviewing the report.

What is voluntary winding up of a company?

The voluntary winding up of a company is the second way to achieve closure. The procedure is often started by the company’s partners or shareholders, who do this by passing a special resolution. When the shareholders believe that the company will become bankrupt and unable to pay its debts, they decide to wind it up voluntarily. By disposing off its assets and paying off any remaining debts, the winding up procedure puts an end to the corporation’s existence. The main objective of the wind-up is to make a profit from the company, which has neither a promising future nor a remaining mission. The court does not require this kind of winding up or liquidation. It is only authorized by the company’s board of directors and shareholders, even under unfavorable market conditions where stakeholders believe the business is having difficulties as a result. They can then enact a resolution to dissolve the business.

Voluntary winding up a company

The process for a company’s board of directors to voluntarily wind it up is as follows:

• A resolution regarding winding up must first be passed by the company’s general meeting;
• The company’s solvency for all outstanding debts must be declared;
• An audit report on the company’s financial statements must be prepared by the auditor;
• The auditor’s report and the declaration of solvency must be submitted to the Registrar of Companies (ROC).
• The company must designate a liquidator for the winding up process; and
• The winding up process begins on the date that the resolution was passed.
• The company must then pass the resolution by a majority.
• The liquidator then prepares the report and calls a general meeting to declare the company’s final accounts prior to the wind-up process;
• The board of directors then passes the resolution;
• The liquidator then sends a copy of the report to the Tribunal and a copy of the statements to the ROC;
• The Tribunal then reviews the report and issues an order to conclude the winding-up process;
• Within thirty (30) days of the Tribunal’s order being passed, the liquidator is required to send a copy of the order to ROC. The liquidator will be subject to sanctions if they fail to comply with this.
• If the ROC is satisfied, it authorizes the company’s winding up and, in the end, removes the applicant company’s name from the Registrar of Companies.
• Subsequently, ROC notifies the Indian Official Gazette to publish the notification.

What is a Fast-Track Exit Scheme (FTE)?

Fast Track Exit, or FTE, is a scheme that was introduced by the Ministry of Corporate Affairs, or MCA, by a notification dated December 26, 2016. As the name implies, companies can remove their names from the Registrar of firms (ROC) by using this scheme. This initiative was introduced with the intention of giving all the closed companies a chance to get their names taken off of ROC.

Winding up of a company through FTE

The following conditions fall under the FTE (Fast Track exit) scheme, which allows companies to have their names removed off the ROC. The following types of businesses will be classified as defunct corporations, and as such, they are eligible to terminate their operations under a Fast Track exit plan. These are the circumstances:

• Compulsory Winding up of Company by Tribunal
• Voluntary Winding up of the Company