Winding up of a Company
What Is Winding Up?
Winding up is the liquidation of Company’s assets which are collected and sold in order to pay the debts incurred. When the company winding up takes place firstly the debts, expenses and costs are paid away and distributed among the shareholders.
Once the Company is liquidated it is formally dissolved and the Company ceases to exists.
Winding up is the legal mechanism to shut down a company and cease all the activites that re carried on . After the Company winding up the existence of the Company comes to an end and the assets are monitored so that the stakeholders interest is not hampered.
A Private Limited Company is an artificial judicial person and requires various compliances if the company fails to maintain these compliances there are fines and penalties or even disqualification of the Directors from further incorporating a Company. It is always a better to wind up a company that has become inactive or where there are no transaction.
THe shareholders of the Company can initiate the winding up of the company anytime. If there are secured or unsecured creditors or employees on roll then all the dues need to be settled. After settling the dues it is necessary to close all the Compamny bank accounts. The GST registration must also be surrendered in case of Company wind up.
Once all the registration are surrendered the winding up application petition can 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 :
Procedure for Voluntary winding up of a Company
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:
Procedure for compulsory winding up of a Company
Step:1 Is to File a petition to the tribunal along with the statement of the affairs of the Company that is to wind up.
Step:2 The tribunal will either accept or reject the petition if the person other than company files a petition then the tribunal may ask the company to file objection. it goes along with the statement of affairs within 30 days.
Step:3 Liquidator needs to be appointed by the tribunal for the winding up process. The liquidator carries out the function of assisting and monitoring the liquidation proceedings.
Step:4 Liquidator is supposed to prepare a draft report for approval. when the draft report gets approved he shall submit the final report to the tribunal for passing the winding up order.
Step:5 It is necessary of the liquidator to forward a copy to the ROC within 30 days,If he fails to do so then he will get a penalty.
Step:6 If the ROC finds the draft satisfactory he then approves the winding up of the Company and the name of the Company is striked from the register of Companies.
Step:7 ROC sends notice for Publication in the official gazette of India
Top reasons why companies wind up
What are the top reasons why Companies windup ?
A private Limited Company is a legal entity established under the Companies Act. Therefore, a company is required to maintain the regular compliances throughout the life cycle.
The process of winding up is for a Company that is not active and avoid the compliance responsibilities.
A company can also be closed by filing an application with the ministry of corporate finances in about 3 to 6 months. This process can happen online enitrely. The process for closing a company is fast and easy if done through Indiafilings.
If a company doesn’t file the compliances on time incurs fine and penalty including debarring the Directors from starting another Company. In that way it is better to windup a company that is inactive and avoid the potential fines or liability in future.
As compared to the maintainance of compliances for a dormant company it is actually to be wind up a company again when the time is right. With Indiafilings winding up is can be done just at Rs.
A company that maintained proper compliances can be liquidated easily. Incase of any over dues of complainces it is necessary to regularize them first. However, it is tonbe noted thata all the registartions aslo need to be surrendered.