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Mansi Goel

Meaning:- Since we believe in Going Concern Assumption, as we want our business to flourish more & more, but at some point of time due to several reasons one has to close down his business and that stage is known as winding up of a company. It is the last stage of company in which its existence for past several years is dissolved and all its assets are used to pay off the creditors, shareholders and other liabilities.

As per section 270 of the Companies Act 2013, the procedure for winding up of a company can be initiated either –

a)      By the tribunal or,

b)      Voluntary.

I.  WINDING UP OF A COMPANY BY A TRIBUNAL:-

As per Companies Act 1956, a company can be wound up by a tribunal on the basis of the following reasons:

1. Suspension of the business for one year from the date of incorporation or suspension of business for whole year.

2.  Reduction in number of minimum members as specified in the act (2 in case of private company and 7 in case of public company)

But with the introduction of new Companies Act 2013, these above stated grounds for winding up have been deleted and some new situations for winding up have been inserted.

As per new Companies Act 2013, a company can be wound up by a tribunal in the below mentioned circumstances:

1. When the company is unable to pay its debts

2. If the company has by special resolution resolved that the company be wound up by the tribunal.

3. If the company has acted against the interest of the integrity or morality of India, security of the state, or has spoiled any kind of friendly relations with foreign or neighboring countries.

4. If the company has not filled its financial statements or annual returns for preceding 5 consecutive financial years.

5. If the tribunal by any means finds that it is just & equitable that the company should be wound up.

6. If the company in any way is indulged in fraudulent activities or any other unlawful business, or any person or management connected with the formation of company is found guilty of fraud, or any kind of misconduct.

 II. FILING OF WINDING UP PETITION:-

Section 272 provides that a winding up petition is to be filed in the prescribed form no 1, 2 or 3 whichever is applicable and it is to be submitted in 3 sets. The petition for compulsory winding up can be presented by the following persons:

  • The company
  • The creditors ; or
  • Any contributory or contributories
  • By the central or state govt.
  • By the registrar of any person authorized by central govt. for that purpose

At the time of filing petition, it shall be accompanied with the statement of Affairs in form no 4. That petition shall state the facts up to a specific date which shall not more than 15 days prior to the date of making the statement. After preparing the statement it shall be certified by a Practicing Chartered Accountant. This petition shall be advertised in not less than 14 days before the date fixed for hearing in both of the newspapers English and any other regional language.

III. FINAL ORDER AND ITS CONTENT:-

The tribunal after hearing the petition has the power to dismiss it or to make an interim order as it think appropriate or it can appoint the provisional liquidator of the company till the passing of winding up order. An order for winding up is given in form 11.

IV. VOLUNTARY WINDING UP OF A COMPANY:-

The company can be wound up voluntarily by the mutual decision of members of the company, if:

Ø  The company passes a Special Resolution stating about the winding up of the company.

Ø  The company in its general meeting passes a resolution for winding up as a result of expiry of the period of its duration as fixed by its Articles of Association or at the occurrence of any such event where the articles provide for dissolution of company.

V. PROCEDURE FOR VOLUNTARY WINDING UP:-

1. Conduct a board meeting with 2 Directors and thereby pass a resolution with a declaration given by directors that they are of the opinion that company has no debt or it will be able to pay its debt after utilizing all the proceeds from sale of its assets.

2. Issues notices in writing for calling of a General Meeting proposing the resolution along with the explanatory statement.

3. In General Meeting pass the ordinary resolution for the purpose of winding up by ordinary majority or special resolution by 3/4th majority. The winding up shall be started from the date of passing the resolution.

4. Conduct a meeting of creditors after passing the resolution, if majority creditors are of the opinion that winding up of the company is beneficial for all parties then company can be wound up voluntarily.

5. Within 10 days of passing the resolution, file a notice with the registrar for appointment of liquidator.

6. Within 14 days of passing such resolution, give a notice of the resolution in the official gazette and also advertise in a newspaper.

7. Within 30 days of General meeting, file certified copies of ordinary or special resolution passed in general meeting.

8. Wind up the affairs of the company and prepare the liquidators account and get the same audited.

9. Conduct a General Meeting of the company.

10. In that General Meeting pass a special resolution for disposal of books and all necessary documents of the company, when the affairs of the company are totally wound up and it is about to dissolve.

11. Within 15 days of final General Meeting of the company, submit a copy of accounts and file an application to the tribunal for passing an order for dissolution.

12. If the tribunal is of the opinion that the accounts are in order  and all the necessary compliances have been fulfilled, the tribunal shall pass an order for dissolving the company within 60 days of receiving such application.

13. The appointed liquidator would then file a copy of order with the registrar.

14. After receiving the order passed by tribunal, the registrar then publish a notice in the official Gazette declaring that the company is dissolved.

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12 Comments

  1. Murali says:

    Hi,

    I would like to know whether a Pvt Ltd Company can be windup within one year or so. The date of registration is on Nov 2015.

  2. V K Chetani says:

    Sir/Madam ,
    I have an outstanding on a Pvt Ltd company since last 6 months which the company is not paying. Hence I intend to serve a winding up notice to the company and then to proceed further in the matter. Kindly let me know what time it takes normally to order winding up by courtn and appoint the liquidator. Thanks & Regards

    V K Chetani

  3. ajesh says:

    1.is appointment of liquidator a must in all kind of winding up(for both pvt and public Cos)..?if yes ,what if a company have (audited) NIL balance sheet(only capital and PL balance)..or company is going for winding up after paying all its debts -Pls give details
    2.At present winding up procedure is coming under Co Act 2013 or 1956?

  4. Ramachandran Vadakkedath says:

    Thanks for the precise coverage of wounding up provisions and procedure under the companies act 2013.
    Can you please confirm whether or not all the provisions of the companies act 2013 relating winding up of companies have been notified and are in force? My email if Id is rvadakkedath2007@gmail.com

  5. CA Manoj Shah says:

    Dear Mansi

    Excellent Summary many many congratulation to make it simple,

    I have one question, One of my Customer company is not paying for Transportation bills over a year and amount is big higher in lakh, and i apprach to tribunal for winding up ?.

    Regards
    Manoj

  6. s p singh bhalla says:

    thanks Mr. Mansi for a good coverage of winding up process and I congratulate u on this write up.

    Kindly guide “can two directors having 2.1/2 % share each (total 05%) apply for winding up voluntarily or otherwise? 95% shares were in the name of my son who has expired recently; his wife is legal heir but she is not applying for the transfer of her husband’s share in her name? As per my understanding, minority share holders of mere 05% shares can’t drive the Company for wind up or for that matter can take any major decision? I shall be grateful for your quick guidance citing relevant provisions of Company Law, 2013 and it’s rules with supporting High Court or Supreme Court citations?

    Also Sir, I have tendered my resignation in prescribed form conveying my inability to carry on the responsibilities of Directorship – having undergone bypass surgery, being patient of Diabetes + hypertension + Asthma and severe gout problem restricting my physical movements. But it is not being accepted on the ground that there have to be minimum two directors. Unfortunately there is no other share holder except remaining shareholder – my wife. How can I get my resignation be notified by the ROC and get my name deleted from the Ministry’s Portal?
    Shall be grateful for your guidance. I am a Sr. citizen in the evening of my life with age of 72+ being on my side.

    Indeed shall be very grateful for your quick repl.

    s p singh bhalla
    Consultant – HR/Industrial &
    Disciplinary Laws.
    # 9815985273; 0172-4659675

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