Winding Up Of A Company

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The winding up of a company is the last stage of a companies’ existence. There may be several reasons for winding up of the company including mutual agreement among stakeholders, loss, bankruptcy, death of promoters etc. Winding up is the process by which the company is put to an end that is the process through which its corporate existence is ended and it is thereafter finally dissolved. As per section 270 of the Companies Act, 2013 a company can be wound up either by a tribunal or by way of voluntary winding up. The provisions of the act lay down proper procedures for the winding up of a company.

Winding Up By A Tribunal

Winding up of a company takes place by a tribunal by appointing a liquidator if the company is unable to pay its debts or the company has passed a special resolution to that effect or the company is acting against the interest or morality of India, security of state, or has spoiled any kind of friendly relations with foreign or neighboring countries or the company has not filed the financial statements or annual returns for preceding five consecutive years or it is deemed just and equitable to the tribunal to wind up the company or the company has undertaken fraudulent activities or any other unlawful business or any person or management connected with the formation of company is found guilty of fraud or any kind of misconduct.

Under section 272 of the companies act, the petition for winding up of a company in any of the circumstances stated above can be filed by any of the following parties-

Such winding up petition shall be filed in form no. 1, 2 or 3, as required along with the statement of affairs in form no. 4. The statement of affairs shall contain facts up to specific date which shall not be more than 15 days prior of the date on which the statement of affairs is filed. Also, it shall be certified by a certified chartered accountant.

    • Company
    • Creditors
    • Contributory or contributories
    • Central or state government
    • Registrar of Companies
    • Any other person authorized by the central government for that purpose
  1. Voluntary Winding Up Voluntary winding up of a company takes place by mutual agreement of the members of the company. Voluntary winding up may take place either by passing of a special resolution or by passing an ordinary resolution by the members as a result of expiry of its time period as fixed by the Articles of Association or the completion of the project or event for which it was constituted. The companies have to comply with the following procedure for winding up as provided by the Companies act, 2013-
    • The company shall conduct a meeting with at least two directors with the agenda to initiate winding up of the company. The directors shall ensure that the company does not have any third party debts or it will be able to repay its debts in case it’s wound up.
    • The company shall issue a written notice in this regard to conduct a general meeting of all the shareholders for passing a resolution for the same.
    • The company in the general meeting shall pass an ordinary resolution to wind up the company by simple majority or special majority of 3/4th members.
    • After passing the resolution, the company shall conduct a meeting of all the creditors. If majority of creditors are of the opinion that winding up would be beneficial for the company, the company may proceed with the same.
    • Within 10 days of the passing of the resolution, the company shall file a notice of winding up with the registrar of companies for appointment of an official liquidator.
    • Within 14 days of the passing of the resolution, the company shall give a notice regarding winding up of the company in the official gazette as well as advertise it in the newspaper.
    • Within 30 days of the passing of the resolution, the company shall file the certified copies of ordinary or the special resolution passed in the general meeting as the case may be.
    • The company shall wind up the affairs of the company and prepare the liquidators account and get the same audited.
    • The company shall again conduct a general meeting in furtherance of the winding up objective.
    • In the general meeting, the company shall pass a special resolution for the disposal of books and all necessary documents.
    • With 15 days of the passing of the resolution, the company shall submit the copy of accounts and file an application for winding up in the tribunal for passing the order for dissolution of the company.
    • The tribunal shall, if satisfied with the documents submitted by the company, pass an order within 60 days to effect of dissolution of the company.
    • After the order to this effect has been passed by the tribunal, the official liquidator shall file a copy of the order with the registrar of companies.
    • After receiving the order passed by tribunal, the registrar shall then publish a notice in the official Gazette declaring that the company is dissolved.
  2. Winding up subject to Supervision of the Court Winding up under the supervision of the court if often confused with winding up by a tribunal. In such a situation, the court only supervises the winding up proceedings subject to certain terms and conditions imposed by the court. The court gives the liberty to the stakeholders to file a winding up petition even when the company is being wound up voluntarily. However, the Petitioner must prove that voluntary winding up cannot continue with fairness to all concerned parties. The liquidator then appointed by the court must submit a report with the registrar of companies in every three months showing the progress of liquation.

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