What is winding up of a company?
Winding up of a company refers to close down of the operations of the company, selling off its assets and paying its liabilities.
A private limited company is an artificial judicial person and requires various compliances like appointment of Auditor, regular filing of tax return, annual return filing and more. Failing to take care of compliance for a company could end in fines and/or disqualification of the directors from incorporating another Company. Therefore, if a private Ltd. has become inactive and there are not any transactions within the company, then it’s best to finish up the company.
Voluntary winding up of a company are often initiated at anytime by the shareholders of the company. just in case there are any secured or unsecured creditors or employees on-roll, the outstanding dues must be settled. Once all the dues are settled, the bank accounts of the company must be closed. Finally, the company must regularise any overdue compliance like tax return or annual filing and surrender the GST registration. Once, all activities are stopped and therefore the registrations are surrendered, the winding up application petition can be filed with the Ministry of Corporate Affairs.
http://www.legalservicesindia.com/article/1319/Winding-Up-of-a-Company.html
Modes of winding up of a company
The main modes of winding up may be discussed under the following three heads, namely:-
1. Compulsory winding up by the court.
2. Voluntary winding up without the intervention of the court.
3. Voluntary winding up with the intervention of the court i.e., under the supervision of the court.
Mode # 1. Compulsory Winding Up by the Court:
Winding up of a Company by an order of the court is called the compulsory winding up. Section 433 of the Companies Act lays down the circumstances under which a Company may be compulsorily wound up. They are: https://www.drheducationci.org/codipost/
(a) If the Company has by special resolution, resolved that the Company may be wound up by the court.
(b) If default is made in delivering the statutory report to the Registrar or in holding the statutory meeting.
(c) If the Company does not commence its business within a year from its incorporation or suspends it for a whole year.
(d) If the number of members is reduced, in the case of a public Company below seven, and in the case of a private company below two.
(e) If the Company is unable to pay its debts.
(f) If the court is of the opinion that it is just and equitable that the company should be wound up.
Persons Entitled to Apply for Liquidation:
The Petition for winding up of a Company may be presented by any of the following persons (Sec. 439):
(1) The Company.
(2) The creditors which include contingent creditors, prospective creditors, secured creditors, debenture holders, or a trustee for debenture holders.
(3) The contributories – comprise present and past shareholders of a Company (Secs. 426 and 428).
(4) The Registrar.
(5) Any person authorised by the Central Government on the-basis of report of inspectors.
Mode # 2. Voluntary Winding Up:
A voluntary winding up occurs without the intervention of the court. Here the Company and its creditors mutually settle their affairs without going to the court.
This mode of winding up takes place on:
(a) The expiry of the prefixed duration of the Company, or the occurrence of event whereby the Company is to be dissolved, and adoption by the Company in general meeting of an ordinary resolution to wind up voluntarily; or
(b) The passing of a special resolution by the Company to wind up voluntarily.
Mode # 3. Winding Up Subject to Supervision of the Court:
Windings up with the intervention of the court are ordered where the voluntary winding up has already commenced. As a matter of fact, it is the voluntary winding up but under the supervision of the court. A court may approve a resolution passed by the Company for voluntary winding up but the winding up should continue under the supervision of the court.
The court will issue such an order only under the following circumstances:
(a) If the resolution for winding up was obtained by fraud by the company; or
(b) If the rules pertaining to winding up are not being properly adhered to; or
The Court may exercise the same powers as it has in the case of compulsory winding up under the order of the court.
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