Wind Up of Company

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    What Is Winding Up?

    To “wind up" a corporation implies “liquifying" its assets, which includes gathering them together and selling them to pay off the firm's obligations. The first thing that must be done when a company is wound up is to settle all debts, expenditures, and charges distributed among the shareholders. After selling off all of the company's assets, the business is considered to have been officially dissolved, and it then ceases to exist.

    The process of legally dissolving a corporation is called “winding up." During this phase, the firm's assets are audited to ensure that the interests of its stakeholders are not jeopardized.

    It is a challenging task to submit all the complaints and run a private limited corporation simultaneously. A dormant firm should be closed down as soon as possible. Shareholders can begin the process of winding down the company at any time they see fit. Before winding down the firm, all debts must be paid in full, regardless of whether they are owed to secured or unsecured creditors. After paying off all of the company's debts and obligations, it is necessary to shut down all of the bank accounts associated with the business. The GST registration must also be returned to the government during the winding up.

    The petition to dissolve the company may then be submitted to the Ministry of Corporate Affairs after all of the registration has been returned.

    wind up of company

    Reasons For Wind Up Of Company

    • The corporation cannot fulfill all compliances regularly and cannot escape the duty of obedience.
    • The firm is dormant, and all commercial operations have been held.
    • The provisions of Section 216 of the Companies Act brought a disagreement between shareholders.
    • Reorganizing the corporate or financial affairs of the group to which the firm belongs may be in the works.
    • Statutory requirements or any violation of the law that the firm committed.
    • A company was behaving outside of what is considered to be its ordinary course of business.

    Types Of Company Windup

    There are two methods to close down a business: the voluntary winding up of a company and the compulsory winding up of a business.

    1. Giving Up Control Voluntarily
    The corporation can end its operations voluntarily under the following situations:

    • The shareholders approved a special resolution to dissolve the corporation.
    • The shareholders approved a resolution to save the company from going bankrupt.

    Process of Dissolving a Company That Is Carried Out Voluntarily

    • We shall meet with all of the Directors to vote on and approve the resolution.
    • It has been decided to send a written notice to summon a general meeting to present the resolution and a good explanation statement.
    • Adoption of the resolution with a simple majority or approval of the particular solution with a three-quarters majority. The date when the resolution was passed will serve as the starting point for the announcement of the company's dissolution.
    • Following the adoption of the resolution, it is necessary to hold a meeting with the creditors. If more than two-thirds of the company's creditors vote in favor of closing down operations, the business may do so voluntarily.
    • Within ten business days, after the resolution is passed, an official notification of the appointment of the liquidator must be sent to the Registrar of companies.
    • It is required that a certified copy of the resolution be approved at the special meeting within the first thirty days after the general meeting.
    • The affairs of the company will wind the company up, and the liquidators will be prepared to audit the process of winding up the firm.
    • The closing session of the general meeting will now get underway.
    • When it is determined that the business will be dissolved, a specific resolution is required to be approved to dispose of all of the firm's records and documents.
    • Within a fortnight following the annual meeting, a petition was presented to the arbitrator requesting that the firm be terminated as a going concern and that the order be issued.
    • After receiving the petition to dissolve the firm, a court must issue an order within the next two months.
    • The Registrar will get a copy of the order filed by the liquidator.
    • When obtaining a copy of the order, the Registrar will announce in the official gazette that the affiliated company has been dissolved. This will occur after the Registrar has received the copy of the order.

    2. The Obligatory Dissolution Of The LLP
    The dissolution of the firm is within the Tribunal's purview. Here are some of the reasons why:

    • Unclear debts
    • Special resolution passed
    • Inappropriate behavior on the part of the corporation.
    • There is a gap of five years between the filing of annual returns.
    • Rank and file of the legal authorities.

    3. Mandatory Procedure for Winding Up Operations

    • Along with the business statement, a petition must be submitted to the Tribunal to wind up the firm.
    • The Tribunal will approve or deny the petition within the first thirty days after presenting a statement of affairs. This decision should be made.
    • The Tribunal will engage the services of a liquidator to oversee the liquidation process.
    • The liquidator will compile the report on the company's complete dissolution into bankruptcy.
    • Within 30 days, a report will be submitted to ROC by a liquidator. In the event of a failure, the liquidator will be subject to a penalty.
    • After thoroughly reviewing the documentation, ROC will approve proceeding with the winding-down procedure.
    • The closure of the particular firm will be announced in the Gazette of India when ROC approves it.

    FAQs(Frequently Asked Questions)

    What does it mean to wind up a company?

    Winding up a company means to shut down the company by following the legal procedure usually via liquidation.

    What are the consequences of winding up a company?

    Winding up doesn’t remove the existence of the company. The company exists till its dissolution but as an entity. All the business is an administrator by liquidator during the liquidation.

    When should you wind up a company?

    If a company can’t clear the debts of £750 or more, and all the shareholders are ready, a director of the company can apply to the court for the winding up. That means a company should stop trading and be liquidated.

    Can I start a new company after liquidation?

    Using the same name of the company or a similar company name following the liquidation of your old company is a legal offense. One must inform all the creditors of the previous company that you are running a company with the same name.