Winding up of any company is the last or final stage of its existence. There may be different reasons for winding up like bankruptcy, the financial loss of the company, mutual agreement from the stakeholders, death of the promoters, etc. it is a process where a company ceases to exist and gets dissolved.
According to the companies act 2013, there are two ways in which a company could be wound up:
- By tribunal
- By voluntary winding
VOLUNTARY WINDING UP OF COMPANY:
A company can voluntary wind up itself because of various reasons, if it is not able to carry its business, or meet financial obligations or was set up for a limited period of time and purpose, etc. company can be wound up through two modes:
- By creditors winding up
- By members voluntary winding up
PROCEDURE FOR WINDING UP:
- BOARD MEETING: A board meeting should be conducted by two or a majority of directors in order to initiate the process of winding up. A declaration should be made that must be verified with an affidavit that the full inquiry is made by them and the company has no remaining debts or is in position to pay its debts within three years of the commencement of winding. The declaration of solvency must be made within five weeks immediately after the resolution is passed.[i]
- NOTICE: Notices must be issued in writing calling for the general meeting of the company. Resolutions must be proposed with a suitable explanation. The process shall start from the time of passing of the resolution. Also, the said document is to be filed with ROC within a period of thirty days.[ii]
- PUBLICATION: Within the fourteen days of the passing of the resolution, the company must give notice of the resolution through advertisement in newspaper and official gazette. Within ten days of the passing of the resolution for winding, a notice should be filed with the registrar for appointing a liquidator.[iii]
- MEETING OF CREDITORS: A meeting of creditors should be conducted after the passing of the resolution. If two-thirds of the creditors are of the opinion to wind up the country for its best interest, the company would wound up voluntarily. If a company cannot meet its liabilities on winding then the company will be wound up by a tribunal.[iv]
- DISSOLUTION OF THE COMPANY: After the affairs of the company are fully wound up, the liquidator shall make up an account showing the winding-up has been conducted. A general meeting must be called for the purpose of giving an explanation. The time place and object of the meeting must be specified by the way of advertisement and must be published within a month before meeting in the official Gazette. Copy of account should also be sent to the OL and ROC within one week after the meeting.
Once the affairs of the company are finalized, the liquidator shall apply for the dissolution of the company with the final report showing the account details of disposed of assets with NCLT. The report must be filed with ROC.
After the final report is submitted, if NCLT is satisfied with the documents it may pass the order for dissolution and the company shall stand dissolved from the particular date.
A copy of the order must be filed with the registrar by the liquidator. After receiving the order the registrar shall publish the notice in Official Gazette stating that the company is dissolved.[v]
[i] Sec 488 companies act, 1956
[ii] Sec 485-486 companies act, 1956
[iii] Sec 487 companies act, 1956
[iv] Sec 493- 497 companies act, 1956
[v] Sec 500-501 companies act, 1956
This Article is Authored by Aashita Mattar, 3rd Year B.A. LL.B, Student of Jemtec school of law (GGSIP University).
Also Read – The Procedure of Winding up in India