Winding Up procedure for the Company
A private limited company is judicial person and its requires the various compliances like appointment of Auditor, regular filing of income tax return, annual return filing and more. Failing to maintain compliance for a Company could result in fines and/or disqualification of the Directors from incorporating another Company. Therefore, if a private limited company has become inactive and there are no transactions in the company, then it is best to wind up the Company.
Voluntary winding up of a company can be initiated at anytime by the shareholders of the company. 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 are closed. Then , the company must regularized any overdue compliance like income tax return or annual filing and surrender the GST registration . Once, all activities are stopped and the registrations are surrendered, the winding up application petition can be filed with the Ministry of Corporate Affairs.
The entire process for winding up of a company can be completed within 3 to 6 months, subject to government processing times. The timeline for winding up of a company could also differ from case to case, based on unique circumstances. To discuss more about winding up a company, get in touch with us for the same .
Winding up of a Company by Tribunal
Winding up of a company may be required due to a number of reasons including closure of business, loss, bankruptcy, passing away of promoters, etc., The procedure for winding up of a company can be initiated voluntarily by the shareholders or creditors or by a Tribunal.
As per the Companies Act 2013, a company can be wound up by a Tribunal, if:
The company is unable to pay its debts.
The company has by special resolution resolved that the company be wound up by the Tribunal.
The company has acted against the interest of the sovereignty and integrity of India, the security of the State, friendly relations with foreign states, public order, decency or morality.
The Tribunal has ordered for winding up of the company under Chapter XIX.
If the company has not filed financial statements or annual returns for the preceding five consecutive financial years.
If the Tribunal is of the opinion that it is just and equitable that be company should be wound up.
If the affairs of the company have been conducted in a fraudulent manner or the company was formed for fraudulent and unlawful purposes or the persons concerned in the formation or management of its affairs have been guilty of fraud, misfeasance or misconduct in connection therewith and it is proper that the company be wound up.
Voluntary Winding up of a Company
The winding up of a company can also be done voluntarily by the members of the Company –
If the company passed a special board resolution for winding up of the Company.
The company in general meeting passed a resolution requiring the company to be wound up voluntarily as a result of the expiry of the period of its duration, if any, fixed by its 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.
Steps for Voluntary Winding up of a Company
The following are the steps for initiating a voluntary winding up of a Company:
Step 1: Convene a Board Meeting with two Director or by a majority of Directors. Passed special board resolution with a proper declaration by the Directors and made an enquiry into the affairs of the Company .They have formed the opinion that the company has no debts or that it will be able to pay its debts in full from the proceeds of the assets sold in voluntary winding up of the company. Also, fix a date, place, time agenda for a General Meeting of the Company after five weeks of this Board Meeting.
Step 2: Issue notices by in writing and calling for the General Meeting of the Company proposing the resolutions, with suitable explanatory statement.
Step 3: In the General Meeting, pass the ordinary resolution for winding up of the company by ordinary majority or special resolution by 3/4 majority. The winding up of the company shall commence from the date of passing of this resolution.
Step 4: On the same day or the next day of passing of resolution of winding up of the Company, conduct a meeting of the Creditors. If two thirds in value of creditors of the company are of the opinion that it is in the interest of all parties to wind up the company, then the company can be wound up voluntarily. If the company cannot meet all its liabilities on winding up, then the Company must be wound up by a Tribunal.
Step 5: Within 10 days of passing of resolution for winding up of company, file a notice with the Registrar for appointment of liquidator.
Step 6: Within 14 days of passing of resolution for winding up of company, give a notice of the resolution in the Official Gazette and also advertise in a newspaper with circulation in the district where the registered office is present.
Step 7: Within 30 days of General Meeting for winding up of company, file certified copies of the ordinary or special resolution passed in the General Meeting for winding up of the company.
Step 8: Wind up affairs of the company and prepare the liquidators account of the winding up of the company and get the same audited.
Step 9: Call for final General Meeting of the Company.
Step 10: Pass a special resolution for disposal of the books and papers of the company when the affairs of the company are completely wound up and it is about to be dissolved.
Step 11: Within two weeks of final General Meeting of the Company, file a copy of the accounts and file and application to the Tribunal for passing an order for dissolution of the company.
Step 12: If the Tribunal is satisfied, the Tribunal shall pass an order dissolving the company within 60 days of receiving the application.
Step 13: The company liquidator would then file a copy of the order with the Registrar.
Step 14: The Registrar, on receiving the copy of the order passed by the Tribunal then publish a notice in the Official Gazette that the company is dissolved.
Reasons to Winding Up of a Company
A company is a legal entity and a juristic person established created under the Companies Act. Therefore, a company is required to maintain regular compliance throughout its lifecycle. Winding up process can be to close a company that is not active and avoid compliance responsibilities.
Fast to Close
A company can also be closed by filing an application with the MCA in about 3 to 6 months. The entire process can be completed through online.
A company doesn’t file its compliances on time incurs fines and penalty including debarment of the Directors from starting another Company therefore it has to be avoided by the directors for some short of negligence in order to file the legal compliances as per the company act .