Summary: Voluntary winding up of a private company in India is a formal process to cease operations, liquidate assets, pay off liabilities, and dissolve the company. It can be executed through four main legal routes. First, under Section 271(1)(a) of the Companies Act, shareholders can approve winding up with a special resolution, appoint a liquidator, and seek dissolution via the National Company Law Tribunal (NCLT). Second, small companies meeting specific financial thresholds (e.g., paid-up capital and liabilities under ₹1 crore) can use the summary winding-up process under Section 361. This route is supervised by the Central Government and an Official Liquidator manages the process. Third, under Section 248, a company with no business operations for two years and no liabilities can apply for strike-off through the Fast Track Exit (FTE) scheme using Form STK-2. Finally, under Section 59 of the Insolvency and Bankruptcy Code (IBC), 2016, a solvent company may opt for voluntary liquidation. This involves a board declaration of solvency, shareholder approval, appointment of an insolvency professional as the liquidator, and notifying the Registrar of Companies and Insolvency Board. Each method requires compliance with specific procedural and eligibility conditions, such as public notices, asset disposal, creditor claim settlements, and final reporting for official dissolution.
WINDING UP A PRIVATE COMPANY
Winding up is the legal process of closing a company by liquidating its assets, settling its liabilities, and distributing any remaining funds to shareholders before dissolution. It signifies the end of a company’s business operations and legal existence. Once the winding-up process is complete, the company is dissolved, meaning it ceases to exist as a legal entity. Its name is removed from the Register of Companies maintained by the Registrar of Companies (ROC), and it can no longer enter into contracts, own property, or conduct business. Any pending legal proceedings against the company also come to an end, except in cases of fraud or unresolved liabilities.
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Ways a Company Can Be Wound Up Voluntarily
1. Voluntary Winding Up under Section 271(1)(a) (Special Resolution by Shareholders)
A company can voluntarily wind up by passing a special resolution with at least 75% shareholder approval. The process includes appointing a liquidator, settling liabilities, filing necessary forms, and obtaining NCLT approval for dissolution.
2. Summary Winding Up under Section 361 (For Small Companies)
Companies with paid-up capital and liabilities under ₹1 crore can opt for summary winding up. This is a simplified process where the Official Liquidator manages asset disposal and debt settlements under the supervision of the Central Government, instead of NCLT.
3. Fast Track Exit (FTE) through Strike Off under Section 248
A company that has no assets, liabilities, or business operations for two years can apply for strike-off through Form STK-2 with the Registrar of Companies (ROC). This is the quickest method but is available only for non-active companies.
4. Winding Up under Insolvency and Bankruptcy Code (IBC), 2016
A solvent company that cannot continue due to financial difficulties can apply for voluntary liquidation under IBC Section 59. The company must be solvent, and a liquidator is appointed to manage asset sales and settlements before dissolution.
Summary Winding Up of Companies
A. Legal Framework
Summary winding up is governed by:
- Companies Act, 2013 – Sections 361 to 365.
- Companies (Winding Up) Rules, 2020
B. Eligibility for Summary Winding Up
Summary winding up applies to companies meeting certain conditions, such as:
- has assets of book value not exceeding one crore rupees; and
- Detailed in the table below:
| Sl. No. | Criteria (Based on Latest Audited Balance Sheet) |
| (a) | The company has taken deposits, and the total outstanding deposits do not exceed ₹25 lakh. |
| (b) | The company’s total outstanding loan, including secured loans, does not exceed ₹50 lakh. |
| (c) | The company’s turnover is up to ₹50 crore. |
| (d) | The company’s paid-up capital does not exceed ₹1 crore. |
C. Step by step procedure:
| STEP NO. | PROCEDURE | PROVISION | EXPLANATION | RELEVAN FORM | |
| Act[1] | Rules[2] | ||||
| STEP 1 | Summary winding-up | Section 361 | Rule 190 | When the company meets the specified criteria, the Central Government may order it to be wound up by summary procedure. | |
| STEP 2 | Appointment of Official Liquidator | Once the order is made, the Central Government shall appoint the Official Liquidator as the liquidator of the company. The Official Liquidator shall forthwith take into his custody or control all assets, effects and actionable claims to which the company is or appears to be entitled. | |||
| STEP 3 | Report by Official Liquidator | The Official Liquidator shall, within thirty days of his appointment, submit a report to the Central Government including a report whether in his opinion, any fraud has been committed in promotion, formation or management of the affairs of the company or not. | |||
| STEP 4 | Direction for investigation | If the Central Government is satisfied that any fraud has been committed by the promoters, directors or any other officer of the company, it may direct further investigation into the affairs of the company and that a report shall be submitted. | |||
| STEP 5 | Order for Winding-up | After considering the investigation report the Central Government may order that winding up may be proceeded. | |||
| STEP 6 | Disposal of assets and notice to debtors of the company | Section 362 | The Official Liquidator shall expeditiously dispose of all the assets whether movable or immovable within sixty days of his appointment. The Official Liquidator shall serve a notice within thirty days of his appointment calling upon the debtors of the company or the contributories, as the case may be, to deposit within thirty days with him the amount payable to the company. |
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| STEP 7 | Call for claims of creditors | Section 363 | The Official Liquidator within thirty days of his appointment shall call upon the creditors of the company to prove their claims in such manner as may be prescribed, within thirty days of the receipt of such call. The Official Liquidator shall prepare a list of claims of creditors and each creditor shall be communicated of the claims accepted or rejected along with reasons to be recorded in writing. |
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| STEP 8 | Appeal by creditors | Section 364 | Any creditor aggrieved by the decision of the Official Liquidator may file an appeal before the Central Government within thirty days of such decision. The Official Liquidator shall make payment to the creditors whose claims have been accepted. |
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| STEP 9 | Final report by Official Liquidator
Dissolution of company |
Section 365 | The Official Liquidator shall, if he is satisfied that the company is finally wound up, submit a final report to (i) the Central Government, in case no reference was made to the Tribunal[3] (ii) in any other case, the Central Government and the Tribunal. |
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| STEP 10 | Order for Dissolution of company | The Central Government, or as the case may be, the Tribunal on receipt of such report shall order that the company be dissolved. | |||
Fast Track Exit (FTE) – Strike Off Under Section 248A.
A. Legal Framework
Fast Track Exit (FTE) is governed by:
- Section 248 of the Companies Act, 2013 – Allows voluntary closure of defunct companies.
- The Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016
B. Eligibility for Strike Off
| Sl. No. | Grounds for filing an application for strike-off |
| (a) | The company has failed to commence its business within one year of incorporation. |
| (c) | The company has not carried on any business or operations for two immediately preceding financial years and has not applied for dormant company status under Section 455. |
| (d) | The subscribers to the memorandum have not paid the subscription amount they undertook at the time of incorporation, and no declaration to this effect has been filed within 180 days of incorporation. |
| (e) | The company is not carrying on any business or operations as revealed after physical verification under Section 12(9). |
| Sl. No. | Restrictions on Filing an application for strike-off |
| (a) | The company has changed its name or shifted its registered office from one state to another within the last three months. |
| (b) | The company has disposed of property or rights for gain in the normal course of business immediately before ceasing trade or operations. |
| (c) | The company has engaged in any activity other than what is necessary for: (i) making an application for strike-off, (ii) deciding whether to do so, (iii) concluding its affairs, or (iv) complying with statutory requirements. |
| (d) | The company has applied to the Tribunal for the sanctioning of a compromise or arrangement, and the matter has not been finally concluded. |
| (e) | The company is being wound up under Chapter XX[4] of the Companies Act, 2013, or under the Insolvency and Bankruptcy Code, 2016. |
Voluntary Application by the Company
A company can voluntarily apply to the Registrar[5] or C-PACE to have its name struck off the Register of Companies.
C-PACE for Company Strike-Off
On April 17, 2023, the Ministry of Corporate Affairs (MCA) introduced and established the Registrar, Centre for Processing Accelerated Corporate Exit (C-PACE). C-PACE serves as the dedicated authority for processing and handling the strike-off applications of companies under the Companies Act 2013.
Key Highlights of C-PACE:
Jurisdiction: C-PACE has territorial jurisdiction across India, overseeing all applications related to the striking off of companies.
Function: It processes and disposes of applications submitted through E-form STK-2 under Section 248 of the Companies Act, 2013.
Sole Authority: C-PACE is the exclusive authority responsible for handling the entire strike-off process, ensuring a streamlined and centralised approach for dissolving non-operational companies.
C. Step by step procedure
| STEP NO. | PROCEDURE | PROVISION | EXPLANATION | RELEVANT FORM | |
| Act[6] | Rules[7] | ||||
| STEP 1 | Ensure compliance with financial filings | Section 137 & Section 92 | The company must file all overdue financial statements and annual returns before applying for strike-off. | N/A | |
| STEP 2 | Board Resolution | The company’s Board of Directors must first pass a board resolution to approve the decision to strike off the company from the Register of Companies. | |||
| STEP 3 | Clearance of Liabilities | Section 248 | Before applying, the company must clear all its outstanding liabilities. This includes settling debts and liabilities and ensuring that the company is financially free of obligations. If there are no liabilities, a declaration must be made to this effect. | ||
| STEP 4 | Filing of Form MGT-14 | After passing the special resolution, the company must file E-form MGT-14 with the Registrar. This form is to be filed within 30 days of passing the resolution and should include a copy of the special resolution. | MGT-14 | ||
| STEP 5 | Extraordinary General Meeting (EGM) | Section 248 | The company must convene an Extraordinary General Meeting (EGM) to pass a special resolution. A special resolution is required to initiate the strike-off process, and this requires the consent of at least 75% of shareholders in terms of paid-up capital. | ||
| STEP 6 | Application for strike-off | Rule 5 | The company may then file an application to the Registrar for removing the name of the company from the register of companies on all or any of the grounds specified for strike-off. | STK 2[8] | |
| STEP 7 | Public notice | Rule 7 | The Registrar shall, on receipt of such application, cause a public notice[9] to be issued. | STK 5 or STK 6 |
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| STEP 8 | Notice of striking off and dissolution of company. | Rule 9 | The Registrar shall cause a notice of striking off the name of the company from the register of companies and its dissolution to be published in the Official and the same shall also be placed on the official website of the Ministry of Corporate Affairs. | STK 7 | |
| STEP 9 | Effect of company notified as dissolved | Section 250 | The company shall on and from the date mentioned in the notice, cease to operate as a company and the Certificate of Incorporation issued to it shall be deemed to have been cancelled from such date except for the purpose of realising the amount due to the company and for the payment or discharge of the liabilities or obligations of the company. | ||
Voluntary Winding Up Under Section 271 of Companies Act, 2013
A. Legal Framework
Voluntary winding up under Section 271(1)(a) of the Companies Act, 2013 allows a company to dissolve itself by passing a special resolution. The process is governed by:
- Companies Act, 2013 – Section 271.
- Companies (Winding Up) Rules, 2020
B. Eligibility for Voluntary Winding Up
A company may opt for voluntary winding up if:
- The Board and shareholders resolve to close operations.
- The company is solvent and can repay its debts.
- The decision is approved by at least 75% of shareholders.
C. Step-by-step Procedure
| STEP NO. | PROCEDURE | PROVISION | EXPLANATION | RELEVANT FORM | |
| Act[10] | Rules[11] | ||||
| STEP 1 | Petition for winding up | Section 272 | Rule 3 | Petition shall be filed by the company or any contributory[12] | WIN 1/WIN 2 |
| Affidavit to be attached | Every petition shall be verified by an affidavit made by the petitioner or by the petitioners, where there is more than one petitioner, and in case the petition is presented by a body corporate, by the Director, Secretary or any other authorised person thereof | WIN 3 | |||
| STEP 2 | Statement of affairs | Section 274 | Rule 4 | The statement shall contain information up to the date which shall not be more than thirty days prior to the date of filling the petition and the statement of affairs shall be made in duplicate, duly verified by an affidavit, and affidavit of concurrence of the statement of affairs | WIN 4 (statement of affairs)
WIN 5 (affidavit) |
| STEP 3 | Copy of Petition to filed with the Registrar | A copy of the petition made under this section shall also be filed with the Registrar. The Registrar shall submit his views to the Tribunal within sixty days of receipt of such petition. | |||
| STEP 4 | Advertisement | Rule 7 | The notice of the petition shall be advertised not less than fourteen days before the date fixed for hearing in any daily newspaper in English and vernacular language widely circulated in the State or Union territory in which the registered office of the company is situated. | WIN 6 | |
| STEP 5 | Affidavit in objection | Rule 11 | Any affidavit in objection to the petition shall be filed within thirty days and copies of the affidavit shall also be given to any contributory appearing in support of the petition who may require the same on payment of five rupees per page within three working days. | ||
| STEP 6 | Affidavit in reply | Rule 12 | An affidavit in reply to the affidavit in objection to the petition shall be filed not less than seven days before the day fixed for the hearing of the petition, and a copy of the affidavit in reply shall be served on the day of the filing thereof on the person by whom the affidavit in objection was filed or his authorised representative | ||
| STEP 7 | Appointment of provisional liquidator/Company Liquidator | Section 275 | Rule 14 | Tribunal may by order appoint a provisional liquidator of the company, pending final orders on the winding up petition. Where the company is not the applicant, notice of the application for appointment of provisional liquidator shall be given to the company. | WIN 7 (application)
WIN 8 (order) |
| STEP 8 | Order for winding -up | Rule 17 | The order for winding up shall be made with such variations as may be necessary and the order for winding-up shall be sent by the Registrar after it is signed and sealed within a period not exceeding seven days from the date of receipt of the order by the Registrar, to the Company Liquidator and the Registrar of Companies. | WIN 11 (Order for winding-up)WIN 12 (to company liquidator)WIN 13 (to registrar) |
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| A copy of the order made by the Tribunal shall also be filed by the liquidator within thirty days of the receipt with the Registrar of Companies | INC-28 | ||||
| STEP 9 | Advertisement of order | Rule 20 | The order for the winding up of a company by the Tribunal shall, within fourteen days of the date of the order, be advertised by the petitioner in a newspaper in the English language and a newspaper in vernacular language widely circulating in the State or the Union territory where the registered office of the company is situated | WIN 14 | |
| STEP 10 | Company Liquidator to take charge of assets and books and papers of company | Section 277 | Rule 22 | On a winding up order being made, the Company Liquidator shall, forthwith take into his custody or under his control all the properties and effects, actionable claims and the books and papers of the company, and it shall be the duty of all persons having custody of any of the properties, books and papers, cash or any other assets of the company, to deliver possession thereof to the Company Liquidator. | |
| STEP 11 | Report by liquidator | Section 281 | Rule 25 | Where the Tribunal has made a winding up order or appointed a Company Liquidator, such liquidator shall, within sixty days from the order, submit to the Tribunal, a report containing such particulars as prescribed in the provision. | WIN 16 |
| Tribunal to fix time limit for liquidation or order for sale of the company | Section 282 | Rule 27 | The Tribunal shall, on consideration of the report of the Company Liquidator, fix a time limit within which the entire proceedings shall be completed and the company be dissolved. The Tribunal may, on examination of the reports submitted to it by the Company Liquidator and after hearing the Company Liquidator, creditors or contributories or any other interested person, order sale of the company as a going concern or its assets or part. |
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| STEP 12 | Application for dissolution by the liquidator | Section 282 | When the affairs of a company have been completely wound up, the Company Liquidator shall make an application to the Tribunal for dissolution of such company. | ||
| STEP 13 | Order for dissolution | The Tribunal shall, within a period of thirty days form the date of the order- (a) forward a copy of the order to the Registrar who shall record in the register relating to the company a minute of the dissolution[13] of the company; and (b) direct the Company Liquidator to forward a copy of the order to the Registrar who shall record in the register relating to the company a minute of the dissolution of the company |
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Voluntary Liquidation Under IBC, 2016
A. Legal Framework
Voluntary liquidation of a company under IBC, 2016 is governed by:
1. Section 59 of the Insolvency and Bankruptcy Code, 2016.
2. The Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017.
B. Eligibility for Voluntary Liquidation
A company can opt for voluntary liquidation under IBC Section 59 if:
- It is solvent (able to pay its debts in full).
- The majority of directors declare solvency in writing.
- A special resolution (75% shareholders’ approval) is passed for voluntary liquidation.
- No pending debt defaults under IBC.
C. Step by step procedure
| STEP NO. | PROCEDURE | PROVISION | EXPLANATION | RELEVANT FORM | |
| Act[14] | Rules[15] | ||||
| STEP 1 | Filing of Declaration by directors | Section 59 | Rule 3 | A corporate person who intends to liquidate itself voluntarily and has not committed any default may initiate voluntary liquidation. The company shall file a declaration[16] from majority of the directors of the company verified by an affidavit stating that— (i) they have made a full inquiry into the affairs of the corporate person and they have formed an opinion that either the corporate person has no debt or that it will be able to pay its debts in full from the proceeds of assets to be sold in the voluntary liquidation; and (ii) the corporate person is not being liquidated to defraud any person. |
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| STEP 2 | Passing of special resolution | Within four weeks of the declaration- (i) a resolution[17] shall be passed by the special majority of the partners or contributories, as the case may be, of the corporate person requiring the corporate person to be liquidated voluntarily and appointing an insolvency professional to act as the liquidator; or (ii) a resolution passed by the majority of the partners or contributories, as the case may be, of the corporate person requiring the corporate person to be liquidated voluntarily as a result of expiry of the period of its duration, if any, fixed by its constitutional documents or on the occurrence of any event in respect of which the constitutional documents provide that the corporate person shall be dissolved, as the case may be and appointing an insolvency professional to act as the liquidator. |
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| STEP 3 | Notification by company | The company shall notify the Registrar of Companies and the Insolvency and Bankruptcy Board of India about the resolution to liquidate the company within seven days of such resolution or the subsequent approval by the creditors, as the case may be. | |||
| STEP 4 | Approval of resolution | Rule 4 | Where the corporate person owes any debt to any person, creditors representing two thirds in value of the debt of the corporate person shall approve the resolution passed within seven days of such resolution. The Board of Directors or the designated partners shall cause the documents to be presented to a creditor before his approval is obtained. |
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| STEP 5 | Application for dissolution | Where the affairs of the corporate person have been completely wound up, and its assets completely liquidated, the liquidator shall make an application to the Adjudicating Authority[18] for the dissolution of such corporate person. | |||
| STEP 6 | Order for dissolution | The Adjudicating Authority shall on an application filed by the liquidator shall pass an order that the corporate debtor shall be dissolved from the date[19] of that order and the corporate debtor shall be dissolved accordingly. | |||
| STEP 7 | Copy of order to be forwarded | A copy of an order shall within fourteen days from the date of such order, be forwarded to the authority with which the corporate person is registered. | |||
[1] The Companies Act, 2013
[2] Companies (Winding Up) Rules, 2020
[3] National Company Law Tribunal (NCLT)
[4] Winding-Up by Tribunal
[5] Registrar of Companies (ROC)
[6] The Companies Act, 2013
[7] Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016
[8] Rule 6- The Form STK 2 shall be certified by a Chartered Accountant in whole time practice or Company Secretary in whole time Practice or Cost Accountant in whole time practice, as the case may be.
[9] The public notice shall be:
(i) placed on the official website of the Ministry of Corporate Affairs on a separate link established on such website in this regard;
(ii) published in the Official Gazette;
(iii) published in English language in a leading English newspaper and at least once in vernacular language in a leading vernacular language newspaper, both having wide circulation in the State in which the registered office of the company is situated.
(iv) the company shall also place the application on its website, if any, till the disposal of the application.
The Registrar of Companies shall, simultaneously intimate the concerned regulatory authorities regulating the company, viz, the Income-tax authorities, central excise authorities and service-tax authorities having jurisdiction over the company, about the proposed action of removal or striking off the names of such companies and seek objections, if any, to be furnished within a period of thirty days from the date of issue of the letter of intimation and if no objections are received within thirty days from the respective authority, it shall be presumed that they have no objections to the proposed action of striking off or removal of name.
[10] The Companies Act, 2013
[11] Companies (Winding Up) Rules, 2020
[12] A contributory shall be entitled to present a petition for the winding up of a company, notwithstanding that he may be the holder of fully paid-up shares, or that the company may have no assets at all or may have no surplus assets left for distribution among the shareholders after the satisfaction of its liabilities, and shares in respect of which he is a contributory or some of them were either originally allotted to him or have been held by him, and registered in his name, for at least six months during the eighteen months immediately before the commencement of the winding up or have devolved on him through the death of a former holder
[13] Rule 177- The winding up of a company shall, be deemed to be concluded at the date on which the order dissolving the company has been reported by the Company Liquidator to the Registrar of Companies unless any fund or assets of the company remaining unclaimed or undistributed in the hands or under the control of the Company Liquidator, have been distributed, or paid into the Company Liquidation Dividend and Undistributed Assets Account.
[14] The Insolvency and Bankruptcy Code, 2016
[15] Insolvency and Bankruptcy Board of India (Voluntary Liquidation) Regulations, 2017
[16] declaration shall be accompanied by-
(a) audited financial statements and record of business operations of the corporate person for the previous two years or for the period since its incorporation, whichever is later
(b) a report of the valuation of the assets of the corporate person, if any, prepared by a registered valuer
[17] A resolution passed shall contain the terms and conditions of the appointment of the insolvency professional, including the remuneration due to him.
Voluntary liquidation proceedings in respect of a company shall be deemed to have commenced from the date of passing of the resolution.
[18] National Company Law Tribunal (NCLT)
[19] Rule 6- The corporate person shall from the voluntary liquidation commencement date cease to carry on its business except as far as required for the beneficial winding up of its business: Provided that the corporate state and corporate powers of the corporate person shall continue until it is dissolved.
Author Bio
Although the term “shall” is used in Fast Track Exit route 3. Step by step (item no. 7 & 8) denoting mandatory issuing of notice by the Registrar (after receipt of Form STK2) in Form STK 5/6 and STK 7, there is no guidance as to where does the Company or its erstwhile Directors stand if the Registrar does not take the required steps. What protective steps do that Company or its erstwhile Directors may take?