Ending an organization’s existence is called winding up. The company’s assets are managed for the benefit of its creditors and members during the winding-up process. The shareholders can initiate a company’s winding up process on their own or they can be forced to do so by a tribunal or a court.
What does it mean to wind up?
The liquidation of a company’s assets to pay off its debts is known as winding up. The company’s debts, expenses, and charges are paid off first in the event of bankruptcy. When a company is wound up, its assets are divided up among its shareholders.
The company officially ceases to exist after being liquidated.
In law, winding up a business means ceasing all operations and doing so legally. A company is wound up when it ceases to exist and its assets are managed to safeguard the interests of its stakeholders.
The shareholders of the company have the legal authority to wind up the business at any time. After the debts have been paid off, the company must close all of its bank accounts. When a company shuts down, its GST registrations must also be surrendered.
A winding up petition can be filed with the Ministry of Corporate Affairs once all registrations have been revoked. A corporation can be wound up in one of two ways: Winding up a company, Voluntary or compulsory
Winding up of a company: Compulsorily
Courts or tribunals may compel the liquidation of businesses established under the ordinance. In certain situations, the Tribunal may liquidate a company. The Companies Act of 2013 states that only the following scenarios make compulsory winding up possible:
* By special resolution, the corporation has been given the authority to be wound up by courts or tribunals. Violates the integrity and sovereignty of the nation. The business has not submitted annual returns or financial statements in the past five years.
* In this case, tribunals or courts conclude that the corporation was formed illegally or fraudulently or that the company is operating fraudulently.
* It believes that winding up the company would be just and fair.
People Who Are Eligible to File a Winding-Up Petition
To close a business, a petition must be filed, and the following people are allowed to do so:
* The company owes its creditors money, contributions of any kind, the office of the registrar, permission from the central government, permission from the state government.
The following other factors to take into account:
* Before submitting the petition for the company to be wound up, the registrar must first get approval from the central government.
* Before the Central Government grants such permission, the company must also be given a reasonable opportunity.
* The registrar will also receive a copy of the appeal, and he will have 60 days to respond.
Know about: Liquidation of a Company
The Tribunal’s actions after receiving the petition
The Companies Act of 2013 specifies what the Tribunal will do after receiving an application for company winding up. The Tribunal would issue one of the following orders upon receiving the Petition:
* Refuse the proposal, whether or not there are costs.
* If a temporary arrangement is deemed necessary, the Tribunal will appoint a preliminary liquidator while a winding-up order is pending. Dissolve the corporation (with or without a fee).
* Before a provisional liquidator is appointed, the company must receive legal notice and a reasonable opportunity for hearing. If someone other than the company files the petition for the business to be wound up, the Tribunal will require the company to submit an objection and an account of affairs within 30 days.
* The liquidator’s books of accounts, which have been completed and inspected up to the order date, are expected to be delivered to the directors and officers.
An Overview of the Compulsory Dissolution Process
As previously stated, only a select group of individuals are permitted to petition for a company to be wound up.
* The Petition must be filed with a Statement of Affairs.
* The Petition should be promoted in the following manner:
* An announcement must be made in accordance with Form 6.
* In the announcement, both the local language and English should be used.
* The company must produce a set of audited accounts. Let’s say that the Tribunal decides that the company’s books are in order and that it has followed all of the mandatory rules. The Tribunal will direct the company to be wound up in that instance.
* Following the Tribunal’s order, the registrar will announce the company’s dissolution by publishing a notice in the official gazette.
Conclusion
A company can be wound up for a variety of reasons, but it’s not as simple as closing its doors or not showing up to work. The process of winding up takes much longer than the process of winding up. With the assistance of an expert, send a legal notice as the first step in the process.
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