What is Winding Up?
A company may wind up its affairs if it is unable to carry on its business, or it is not able to meet the financial obligation, etc. A company shall be voluntary wound up by itself or can opt for a modes given below.
- By tribunal
Winding up by Tribunal: there are certain circumstances where the company shall be wound up by the Tribunal:
A company may, on a petition under section 272, be wound up by the tribunal:
- If it is unable to pay its debts.
- By special resolution resolved that the company be wound up.
- If company has acted against the interests of sovereignty and integrity of India.
- If tribunal has ordered for winding up of the company.
- If the tribunal is of the opinion that the company has been conducted in a fraudulent manner.
- If company has made a default in filing with the Registrar its financial statements or annual returns immediately preceding 5 Consecutive financial years.
- Where the Tribunal is opinion that it is just and equitable that the company should be wound up.
What is the meaning of unable to pay its debts means?
- If the company is indebted by the creditor for an amount exceeding 1 lakh has served to the company to pay the said amount.
- If tribunal is of satisfaction that company is unable to pay the debts.
- If any execution is issued on a decree or order of any court or tribunal in favour of a creditor.
Who can file the petition?
A petition to the tribunal for the winding up of Company shall be presented by-
- The company
- Any creditor or creditors
- Any contributory or contributories
- All or any person specified above (together)
- The Registrar of Companies.
- Any person authorized by Central Government in that behalf.
What are the powers of Tribunal?
The powers of tribunal are that on receipt of a petition for winding up under Section 272 of the Companies Act, 2013 may pass any of the orders such as:
- Dismiss the petition.
- Make interim order as it thinks fit.
- Appoint provisional liquidator, till the making up of winding up order.
- Make order of winding up.
- Any other order as it thinks fit.
Voluntary Winding up of a Company
Once the application is filled and submitted, then it shall be forwarded to the proper officer who will then examine the application and the documents attached.
The winding up can be done by the members of the Company by:
Passing a special resolution – the company passes a resolution requiring the company to be wound up by passing a special resolution, voluntarily on expiry of duration as under the articles of association or occurrence of any event in respect it should be dissolved.
Steps under Voluntary Winding up
- Hold Board Meeting: convene a board meeting and pass the special resolution in respect of the same.
- Fix a date, time place and agenda of holding the general meeting for the same after 5 weeks of holding a board meeting.
- Issuance of notice in writing proposing the resolution and explanatory statement.
- Pass the ordinary resolution for winding up by ordinary majority or special resolution by ¾ majority.
- Meeting of the Creditors shall be conducted. If 2/3rd in value of creditors of the company are of the opinion that it is in interest of the parties to wind up the company, then company shall be wound up.
- Within a time span of 10 days of passing of resolution, file a notice with Registrar for appointment of liquidator.
- Within 14 days of resolution, give notice of resolution in the official Gazette and also advertise in a newspaper.
- Within 30 days of General meeting, file certified copies of OR and SR passed in General meeting.
- Preparation of Liquidators account shall be done and also get them audited.
- Call the final General meeting.
- File copy of accounts and file application to tribunal for passing an order for dissolution of company within a time span of 2 weeks.
- If tribunal is satisfied, order shall be passed for dissolving, within 60 days of application.
- A copy of order shall be filed by official liquidator by Registrar.
- The registrar shall publish the notice in the official gazette that the company is dissolved, after receiving the order passed by the Tribunal.
The companies are given life through the ensouling of incorporation and are vanished through the process of winding up or liquidation which ends in dissolution of company. The winding up is a process entailing differing actions to liquify the assets of the company and accounting for the assets to the persons entitled for them as per their order priority set in the law. During this process directors are side lined and liquidator/official receiver takes control into his hands, and acting in accordance with the law to give an end to the artificial legal personality.
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