The process of starting and closing a business is a legal process. In this modern era, doing business makes it easier to set up a company/branch.
In view of the 2013 Company Law, winding up is the process of dissolving the legal existence of a company. In the practical scenario of the previous Companies Act, dissolving a company took years and was a lengthy process. This article reviews the liquidation and closure procedures required by the Companies Act 2013 and the Bankruptcy.
MEANING OF WINDING UP:
Winding up is a process and is an act of saving company assets and liquidating company assets. The Company remains a legal entity even though it is in the liquidation process.
Provisions under the Companies Act 2013:
The provisions of the 2013 Company Law completely cover all aspects of winding up. Provisions 270 to 365 deal with winding up, almost 1/4 the act. He sets out the full legal provisions in this section:
Section 270 of the Act tells us that a company may be dissolved or:
- Voluntary liquidation or
- Dismissal by Court
- Sections 271 to 303 – dealing with liquidation by the Court
- Sections 204 to 323 deal with voluntary liquidations
- Sections 324 to 358 – cover the conditions that apply to each method of liquidation
- Sections 359 to 365 – cover provisions relating to authorized liquidators
VOLUNTEER COMPANY OPENING:
Section 304 stipulates that a company may be dissolved voluntarily with the mutual consent of the shareholders if:
- The Company adopts a special resolution to terminate the contract
- The articles of association of the Company provide for termination at the expiration of the specified period or upon the occurrence of such event, and the general meeting decides on the termination.
Process of voluntary winding of Company:
PROCEDURES FOR ESTABLISHING A VOLUNTEER BUSINESS:
In particular, many provisions must be observed for the liquidation and compliance process. Limiting the procedural part, the following provides an extensive schedule of events:
- The final step is voluntary winding up, where the Board of Directors has issued a resolution establishing the solvency of the Company, stating that the Company has no debts or after taking all the proceeds from the sale of its assets. This is nothing more than a statement of the Company’s solvency.
- A general meeting is then held for the approval of the members. In this context, holding a general meeting with the proposed decision and its reasons must be made in writing.
- A simple decision must be decided in a general meeting to end it with a simple decision with a simple majority or a special decision with a 3/4 majority. The day the resolution is passed is the start of the liquidation procedure.
- In addition to the general meeting, a separate meeting of creditors is held, and if the majority of creditors are of the opinion that the liquidation benefits all parties, the Company may be dissolved voluntarily, it is decided.
- Within ten days from adopting the resolution, the Company submits a notification to the commercial register to appoint a liquidator. And announce a copy of the notification of the decision in the official gazette and the newspapers within 14 days.
- Within 30 days of the General Meeting, a certified copy of the passed ordinary or special resolution must be submitted to the competent authority.
- Next tedious process is liquidators wind up company business and create liquidator account and get same verification. Although it seems simple, the completion time is never known here.
- The place where the general meeting is held, where a special decision is made to keep books and all documents required by the Company. At this point, the Company’s operations came to an end and almost dissolved. This is the last session before dissolution.
- Within 15 days from the last general meeting of the Company, the Company will submit a financial statement copy and submit it to the Court for a decision to be set aside. If the Court believes that the accounts are in order and all requirements have been met, the Court will issue the order to the Company to be dissolved within 60 days of receipt of the request.
- Upon receipt of the notice of termination of the Court, the Company will submit a copy of the decision to the registrar. The secretary then announced the dissolution of the Company in the official gazette.
Winding-Up of Company by Tribunal:
According to the Companies Act, “Section 271”, a company may be closed in Court if a request for termination is made under this section in any of the following circumstances:
- When the Company is unable to pay its debts
- If the Company has decided to dissolve the Company through a special resolution
- If the Company has violated the interests of India’s sovereignty or integrity, national security or any friendly relations with foreign or neighbouring countries, public order, decency or morality.
- If the Company is in arrears by submitting annual accounts or annual returns to the secretary for the previous five consecutive financial years
- When the Court has ordered the liquidation of the ailing Company
- If the Court, at the request of the clerk or other person authorized by the central government by notification, considers that the activities of the Company have been carried out fraudulently or that the Company has been established due to fraud or fraud, or the persons involved in its establishment or management are guilty of any cases of fraud, wrongdoing or wrongdoing related to that and the Company must be dissolved.
- If the Court considers that the liquidation of the Company is fair and reasonable
FILING OF WINDING-UP PETITION – SECTION 272
- A winding-up petition for compulsory winding-up can be presented by the following persons in the prescribed form.
- Any creditor or creditor, including prospective or prospective creditors
- Any contributions or contributions
- From the central or state government
- From the secretary
- Any person authorized by the central government. for this purpose
When applying for liquidation, it must be accompanied by a statement about the cases. The petition must explain the facts by the date specified, no later than 15 days before the comment date.
This declaration is certified by a practitioner. This will be announced in English and other regional languages newspapers at least 14 days before the hearing date.
Upon request under Section 272, within 90 days of filing the request, the Court may issue one of the following orders:
- reject the application with or without a fee;
- Make temporary orders according to your wishes;
- appoint a liquidator while waiting for a liquidation order;
- Issuing a cancellation order with or without a fee; or
- Any other order you think is suitable.
The arbitral tribunal offers the opportunity to be heard by the Company before the appointment of an interim liquidator. The order to dissolve a company works for all creditors and all contributions of the Company as if issued at the joint request of the creditors and contributions.
The liquidator must submit a report to the Court within sixty days of the order stating:
- Types and details of company assets with their respective locations and values, mentioning cash and bank balances if any, and securities held according to the agreement if any.
- Asset valuation report of the registered value
- Total issued, issued and paid-up capital;
- the Company’s existing and contingent liabilities and the names, addresses and professions of its creditors. It also shows the amount of guaranteed and unsecured debt separately. In the case of a covered claim, information about the securities provided by the Company or its agents, their value and date of release must also be provided.
- debts to companies and the names, addresses and occupations of persons owed to them and the amounts that may arise from them;
- guarantees, if any, provided by the Company;
- a list of instalments due and due, as well as details of any outstanding calls;
- Trademark and intellectual property information, if any, owned by the Company;
- Details of existing agreements, joint ventures and collaborations, if any;
- parent and subsidiary company data, if available;
- Details related to the lawsuits filed by or against the Company; and
- Other information that the Company’s liquidators may order or deem necessary.
As soon as the Company’s business is completed, the liquidator applies to the Court to wind up the Company.
The petition submitted to the Court by the liquidator of the Company or if the Court considers the dissolution of the Company to be reasonable and appropriate will be punished by the punishment for dissolving the Company. The order will come in effect from the date of the order, and the Company will be terminated accordingly.
After hearing the application, the Court can reject the application or issue an order or appoint a preliminary bankruptcy administrator until a liquidation order is issued. Until then, the legal existence of the Company will continue.
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