What is Winding up?
The purpose of winding up of the company to put an end to life of the company and to realize the assets and pay the debts of the company expeditiously and fairly in accordance with the law. However, the purpose must not be exploited for the benefit or advantage of any class or person entitled to submit petition for winding up of a company. It may be noted that on winding up, the company does not cease to exist as such except when it is dissolved. The administrative machinery of the company gets changed as the administration is transferred in the hands of the liquidator after paying off all the debts, at the end the company will have no assets or liabilities and it will, therefore, be simply to dissolved.
Modes of Winding Up
A Company can voluntary wound up itself or can opt for the modes
- By tribunal
Who can file petition for winding up?
Petition can file be filed for winding up by any of the following:
- Any of the contributory or contributories.
- The registrar.
- Person authorized by the Central Government.
- Case falling under section 271, by the central Government.
Circumstance under which the company shall be wound up by the Tribunal
- Where the Tribunal is opinion that it is just and equitable that the company should be wound up.
- If the company is unable to pay its debts.
- The company has passed the special resolution that the company should be wound up.
- Company has acted against the interests of sovereignty and integrity of India.
- Tribunal has ordered for winding up.
- If the financial statements or annual returns for immediately preceding five consecutive financial years has not been filled with the registrar by the company.
Power of the Tribunal
The tribunal may pass an order within 90 days from the date of presentation of the petition by any of the following ways
- Dismiss it, with or without costs;
- As the tribunal thinks fit make any interim order;
- Appoint a provisional liquidator of the company till the making of a winding up order.
- Make an order for the winding up of the company with or without costs and any of the order if it thinks fit.
Voluntary Winding Up
The voluntary winding up can be done by the members of the company by-
Passing Special resolution
- As a result of the expiry of the period of its duration for which it has been incorporated.
- Any event in respect of which the articles of association provide that the company should be dissolved.
Voluntary winding up can be done the members and creditors
The members can opt for a voluntary winding up when the company is solvent and is able to pay its debts in full and in that case it is not necessary for the company to consult the creditors.
The directors should made a Declaration of solvency accompanied by a statement of assets and liabilities up to the date of declaration and the auditor report reflecting that the company has no dues or if any the company will be able to pay its debts in full from the proceeds of assets sold in winding up process .
The declaration should be made within 5 weeks preceding the date of passing the resolution for winding up and filed to the registrar along with the declaration that the company is not being wound up for fraud means or to fraud any person.
Creditor's voluntary Winding up
If the liquidator appointed is of the view that the company is not able to pay its debts in full, the company and liquidator shall call for a meeting of the creditors of the company. The statement of affairs of the company should be submitted for the meeting.
Steps for Voluntary winding Up
- A board meeting should be conducted with the two directors or by a majority of directors with a declaration by the Directors that they have made an enquiry into the affairs of the Company and they have formed the opinion that the company has no debts or that it will be able to pay its debts in full from the proceeds of the assets sold in voluntary winding up of the company.
- Fixing Date, time and place for conducting the general meeting.
- Issuance of notice for calling general meeting.
- Passing the special resolution of winding up conducting the meeting of Creditors and members, if it is in the interest of the all parties to wind up the company, then the company can be wound up.
- Appointment of registrar within 10 days of passing the special resolution.
- A notice should be publish in the Official Gazette and also advertise in a newspaper where the registered office of the company is situated.
- File certified copies of Special resolution within 30 days of general meeting.
- Preparation and audit of Liquidators account.
- Conducting a final general meeting and filing application along with the copy of account to the tribunal for passing an order for dissolution of the company within a time period of 2 weeks.
- Order of dissolution shall be passed by the tribunal within 60 days of application if satisfied.
- Liquidator shall file a copy of order to the Registrar.
- The notice in the official gazette shall be published by the registrar that the company is dissolved once the order of the tribunal is received by the registrar.