Dec 10,2021 | 4 min read

Winding up a Company? 一 Here's how to do it.

When a firm is closing down, it stops doing business as normal. Its primary function is to liquidate assets, pay creditors, and distribute the proceeds. Although it is often the outcome of bankruptcy, winding up a firm is not the same as bankruptcy. 

What Is Winding Up? 

The process of terminating a business is known as winding up. When a corporation is winding down, it stops doing business as usual. Its primary function is to liquidate shares, settle debts, and transfer any residual assets to partners or shareholders. The word is most often used in the United Kingdom, where it refers to the process of turning assets into cash. 

A company can be wound up in two different ways-

  • Voluntary winding up of a Company

  • Compulsory winding up of a company

Voluntary Winding up of a Company

  • The board of directors approves a special resolution to dissolve the corporation.

  • The General Meeting of the Company passes a resolution requiring a company to wind up voluntarily as a result of the expiration of the period of its duration, any as provided in the Articles of Association, or the occurrence of any event for 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 must be passed, with a statement from the directors that they have conducted an investigation into the affairs of the company and that the company will not pay any debt or that the company will pay with inventory of  assets sold voluntarily Dissolution of the company. 

  •  The call for the general meeting of the company that proposes the resolutions must be in writing with adequate reason. 

  •  Approve the ordinary resolution of dissolution of the company in the general meeting by simple majority or a special resolution by majority of 3/4. The dissolution of the company begins the day the resolution is approved. 

  •  A meeting of  creditors will be held on the same day or the  day after the liquidation resolution is issued. If 2/3 of the creditors believe that it is in the best interest of all parties to dissolve the company, the company can be dissolved voluntarily.

  • A notification for appointment of liquidator must be filed with the registrar within 10 days of passing the resolution for the company's winding up.

  • Certified copies of the ordinary or special resolution passed in the general meeting for the winding up of the Company within 30 days of the general meeting for the winding up of the Company.

  • The company's affairs must be wound up, and the liquidators account of the Winding up account must be prepared and audited.

  • Call for the Company's last General Meeting.

  • When the company's affairs are entirely wound up and it is going to be dissolved, a specific resolution should be made for the disposal of the company's books and documents.

  • File a copy of the accounts and an application to the tribunal for the passing of an order for the dissolution of the business within two weeks of the general meeting of the company.

  • Within 60 days after receiving the application, the tribunal must issue an order dissolving the corporation.

  • A copy of the order must be filed with the registrar by the company liquidator.

  • The registrar will then issue a notice in the official gazette stating the Company is being dissolved after obtaining a copy of the order approved by the Tribunal.

The following are the reasons behind this 一

  • A company's unpaid debts

  • When a special resolution fort wound up is passed

  • An illegal conduct committed by a corporation or its management.

  • If the firm is implicated in any type of fraud or misbehaviour.

  • If you don't file your yearly reports or financial statements with the ROC for five years in a row, you'll be fined.

  • The Tribunal believes that the company should be closed down.

Compulsory winding up of a Company 一

  1. Is to file a petition with the tribunal, along with a statement of the company's affairs.

  2. If a petition is filed by someone other than the corporation, the tribunal may request that the company file an opposition. Within 30 days, it will be accompanied by the statement of affairs.

  3. For the winding up procedure, the tribunal must appoint liquidators. The liquidator is responsible for helping and overseeing the liquidation process.

  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.

  5. It is necessary for the liquidator to forward a copy to the ROC within 30 days,If he fails to do so then he will get a penalty.

  6. If the ROC finds the draft satisfactory he then approves the winding up of the Company and the name of the Company is struck from the register of Companies.

  7. ROC sends notice for Publication in the official gazette of India

A company's winding up is a legal process for permanently closing it down. It is a procedure in which a company's corporate existence comes to an end after which the company is liquidated under the supervision of a Liquidator. During this critical period of the Company's life, the Liquidator oversees and manages the Company's assets to ensure that the interests of the stakeholders are not jeopardised. The Company is dissolved and the name is struck off by the Registrar of Companies at the end of the process. As a result, the Company's existence comes to an end.

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