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Winding Up - Company
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Take your first step towards winding up your Business. A Company not commenced its business within one year from the date of incorporation/inactive for two years/not a Dormant Company.
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- Accounts Finalisation
- Winding Up drafting
- Winding up filing
- ITR - 6 filing
- DIN KYC filing
- GST Cancellation
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Winding up of a Company
Winding up is the process of liquidating a company’s assets, which are gathered and sold to settle its debts. During the winding-up procedure, debts, expenses, and costs are prioritized and disbursed among shareholders.
Upon the completion of the liquidation, the company is formally dissolved, and its existence comes to an end.
Winding up serves as the legal mechanism to bring closure to a company and terminate all ongoing activities. Post-winding up, the company’s assets are monitored to safeguard the interests of stakeholders.
A Private Limited Company, being an artificial judicial entity, necessitates various compliances. Failure to adhere to these requirements can result in fines, penalties, or even disqualification of directors from incorporating future companies. It is prudent to wind up an inactive company or one with no transactions.
Shareholders hold the authority to initiate the winding-up process at any time. Settlement of dues to secured or unsecured creditors and employees is paramount. Following the resolution of dues, the closure of all company bank accounts is mandatory. Additionally, in the case of company wind-up, surrendering the GST registration is essential.
Once all necessary registrations are surrendered, a winding-up application petition can be filed with the Ministry of Corporate Affairs.
Types of Company windup
What are the different ways in which an individual can windup a Company?
A company can be wound up in two different ways-
- Voluntary winding up of a Company
- Compulsory winding up of a company
1. Voluntary Winding up of a Company
The Winding up of a Company can be done voluntarily by the members of the Company, if :
- The company passes a special resolution for winding up the Company.
- The Company in general meeting passes a resolution which requires a company to wind up voluntarily as a result of the expiry of the period of its duration, any as per the Articles of Association or on the occurrence of any event in respect of which the articles of association provide that the company should be dissolved.
Procedure for Voluntary winding up of a Company
- Convene a board meeting with the Directors in which a resolution should be passed with a declaration by the directors that they have made an enquiry in the affairs of the Company and the company no debts or the Company will pay from the precedes of the assets sold in the voluntary wind up of the company.
- Notices should be issued in writing to call for the general meeting of the Company proposing the resolutions, with a suitable explanatory statement.
- Pass the ordinary resolution for winding up of the Company in the generally meeting by ordinary majority or special resolution by 3/4 majority. The Winding up of the Company shall commence from the date of passing the resolution.
- A meeting of the creditors should be conducted on the same day or the next day of passing the resolution regarding winding up. If the 2/3rd value of the creditors are of the opinion that it is in interest of all parties to windup the Company, the the Company can wound up voluntarily.
- Within 10 days of passing the resolution for company winding up , a notice for appointment of liquidator must be filed with the registrar.
- Within 30 days of the general meeting for the winding up the certified copies of the ordinary or special resolution passed in the general meeting for the winding up of the Company.
- The affairs of the company need to be wind up and prepare the liquidators account of the Winding up account and to get it audited.
- Call for the final General meeting of the Company.
- A special resolution should be passed for the disposal of the books and the papers of the company when the affairs of the company are completely wound up and it is about to be dissolved.
- Within two weeks of the general meeting of the Company, file a copy of the accounts and file and the application to the tribunal for passing an order for the dissolution of the company.
- The tribunal shall pass an order dissolving the company within 60 days of receiving the application.
- The registrar will then on receiving the copy of the order passed by the Tribunal then publish a notice in the official gazette that the Company is dissolved.
2. Compulsory winding up of a Private Limited Company
Tribunal is responsible for this kind of wind up of Companies.
Here are the reasons for the same
- Unpaid debts of a Company
- When a special resolution is passed fort winding up
- An unlawful act by a company or the management of the Company
- If the company is involved in fraudulent acts or misconduct
- If the annual returns or financial statements are not filed for five consecutive years with the ROC
- The Tribunal is of the view that the company should windup.
Procedure for compulsory winding up of a Company
Step 1: Filing a Petition to the Tribunal
The initial step involves filing a petition to the tribunal, accompanied by a detailed statement of the company’s affairs that is slated for winding up.
Step 2: Tribunal Evaluation and Response
Upon submission, the tribunal evaluates the petition and may either accept or reject it. If the petitioner is someone other than the company, the tribunal may request the company to file objections within 30 days, aligning with the submission of a statement of affairs.
Step 3: Appointment of Liquidator
The tribunal appoints a liquidator to oversee the winding-up process. The liquidator assumes the responsibilities of assisting and overseeing the proceedings of liquidation.
Step 4: Preparation and Approval of Draft Report
The liquidator prepares a draft report for approval. Upon approval, the final report is submitted to the tribunal, leading to the issuance of a winding-up order.
Step 5: Submission to ROC and Penalty Avoidance
It is imperative for the liquidator to forward a copy of the approved report to the Registrar of Companies (ROC) within 30 days. Failure to do so incurs penalties.
Step 6: ROC Approval and Striking off from the Register
The ROC reviews the submitted draft and, if found satisfactory, approves the winding up of the company. Subsequently, the company’s name is struck off from the Register of Companies.
Step 7: Publication Notice by ROC
The ROC issues a notice for publication in the official gazette of India.
Top Reasons for Company Winding Up
Why do companies wind up? A private limited company, governed by the Companies Act, is legally obligated to adhere to regular compliances throughout its life cycle.
The winding-up process is typically initiated for companies that are inactive, enabling them to avoid compliance responsibilities.
Closing a company can be accomplished by filing an application with the Ministry of Corporate Affairs, a process that takes approximately 3 to 6 months and can be completed entirely online through Bmcs.
Non-compliance by a company, leading to fines and penalties, including the disqualification of directors from starting another company, makes winding up an inactive company a prudent choice to avoid potential liabilities.
Compared to the maintenance of compliances for a dormant company, winding up with Bmcs is a straightforward process and can be done at an affordable cost.
A company that has diligently maintained proper compliances can be liquidated easily. In cases of compliance dues, regularization is necessary before initiating the winding-up process. Additionally, all registrations must be duly surrendered as part of the procedure.
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