Winding Up of a Company: Meaning, Procedure, Documents, Fees and Timelines

Winding up of a company means shutting down the company. It is the end of the existence of the company. After winding up, the business of the company ceases to exist. Many people use the terms “winding up” and “liquidation” interchangeably. However, there is a huge difference between the two terms.

Liquidation is the process of selling assets to pay for the liabilities of a company. While winding up succeeds liquidation and it is the end of the operations of the company. The winding up of a company can be done by following the procedure for winding up of a company.

What is the Winding Up of a Company?

The winding up of a company means the closure of its operations. It is the dissolution of the affairs of the company. Section 2(94A) of the Companies Act, 2013 provides the definition of the Companies Act, 2013. The winding up of a company operates on two levels, i.e., liquidation and dissolution.

In liquidation, the company prepares a list of assets and liabilities and then proceeds to sell off the assets to pay its creditors. After paying all the debts, the company goes into dissolution, where the existence of the company comes to an end.

Modes of Winding Up of a Company

There are different ways in which a company can be wound up. As per Section 293 of the Companies Act, 2013, the modes of winding up of a company are:

• Voluntary Winding Up: The voluntary winding up of a company occurs when the company itself decides to get wound up and the shareholders of the company pass a special resolution in a duly convened meeting to authorize the winding up of the company.
• Compulsory Winding Up: The appropriate authorities conduct the compulsory winding up of a company if they believe that the company has acted against the integrity of the nation, is unable to pay its debts, or it is just and equitable for the company to be wound up.
• Supervision by Court: In this mode, the company is wound up voluntarily but the whole process of winding up is supervised by the court to ensure that the interests of the creditors are protected and the winding up of the company is not done to defraud anyone.

Grounds for Compulsory Winding Up of a Company

The company can be compulsorily wound up on any of the following grounds:

• If a company, by passing a special resolution, has decided to get wound up.
• If the company has acted against the interests of the sovereignty and integrity of India.
• On an application made by any person authorized by the Central Government/State Government or by the Registrar, if the tribunal is of the opinion that the affairs of the company have been conducted in a fraudulent manner.
• If a company has made a default in filing its financial statement or annual returns for the immediately preceding five consecutive financial years.
• If the tribunal is of the opinion that it is just and equitable for the company to be wound up.

Process for Voluntary Winding Up of a Company

The voluntary winding up of a company is done by following the procedure for winding up of a company:

• Step 1: Declaration of Solvency

  The directors of the concerned company should give a declaration of solvency stating that the financial position of the company is sound, it will be able to pay all of its debts in full, and the winding up is not done to defraud any person. Every director shall also submit an affidavit. The directors should also call a meeting of the shareholders to obtain their approval.

• Step 2: Pass Special Resolution

  The shareholders should approve the proposal to wind up the company by passing a special resolution at a duly convened meeting.

• Step 3: Notification of Resolution

  The company should publish information about passing a special resolution in the official gazette and newspapers within 10 days of passing the resolution. A copy of the resolution should be filed with the Registrar of Companies (ROC).

• Step 4: Appointment of Liquidator

  The company should appoint a liquidator, intimate the ROC, and publish the appointment details in the official gazette within 14 days of the appointment.

• Step 5: Convene the Meeting of Creditors

  The liquidator should hold a meeting of the creditors to determine their debts and to analyse the situation of the company to pay off its debts.

• Step 6: Filing with ROC

  The company should file a return, including the notice of the creditors meeting and other documents, within 10 days of the conclusion of the meeting.

• Step 7: Final Report and Meeting

  The liquidator should make a final report of winding up and a copy of financial accounts and present it before the shareholders in a duly convened meeting. The notice of such a meeting shall be published in the official gazette.

• Step 8: Submit the Final Documents

  The liquidator should submit the final report and accounts, along with the information that all debt has been paid off, to the Registrar of Companies (ROC).

• Step 9: Striking off the Name of the Company

  The ROC shall, after satisfying itself that the company has paid all its debts and conducted the winding-up process in an adequate manner, strike off the name of the company from the register of companies and the company shall stand dissolved.

Process for Compulsory Winding Up of a Company

The tribunal may wind up a company compulsorily by following the procedure for winding up of a company. The steps involve:

• Step 1: Filing a Petition

  A petition to compulsory wind up a company can be made by any person authorised by the central or state government or any regulatory authority or any person aggrieved with the tribunal.

• Step 2: Scrutiny of the Petition

  The tribunal will analyze the petition and will forward a copy of the petition to the company to submit its views on the petition for the winding up of the company. The tribunal shall also publish in the official gazette that the winding-up order has been passed against the company.

• Step 3: Appointment of a Liquidator

  The tribunal will appoint a liquidator to conduct the winding-up process of the company and ensure that all the assets are distributed fairly.

• Step 4: Prepare a Report

  The liquidator shall prepare a report mentioning his findings and all the necessary details related to winding up.

• Step 5: Submit the Report

  The liquidator shall submit the report to the ROC within 30 days of the order of winding up. If the liquidator delays filing the winding-up report, he will bear the penalties.

• Step 6: Final Order by ROC

  The ROC shall examine the report of the liquidator and may pass the order winding up the company if he feels that all the debts are paid in full.

• Step 7: Publish in the Official Gazette

  The ROC shall publish a notice of dissolution of the company in the official gazette and the company shall stand dissolved from the date of publication in the official gazette of India.

Documents for Winding up of a Company

The documents required for the winding up of a company are:

• In case of voluntary winding up of a company:
  • (a) A certified copy of the special resolution
  • (b) Declaration of solvency
  • (c) Affidavit by directors
  • (d) Notice of winding up published in official gazette
  • (e) Consent of Liquidator
  • (f) Report of Liquidator
  • (g) Notice of winding up of a company
• In case of compulsory winding up of a company:
  • (a) Consent of liquidator
  • (b) Preliminary report by liquidator
  • (c) Copy of a Petition
  • (d) Notice of winding up of a company

Timeline for Winding up of a Company

The winding up of a company is a process that requires lots of compliance and approval. This process should be conducted with the help of professionals to wind up a company smoothly. The winding up of a company may be completed within 2 to 3 months, depending on different cases.

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Conclusion

In conclusion, winding up of a company means bringing an end to its existence. The winding up of a company can be done voluntarily, compulsorily, or under the supervision of the court. The company is required to follow the procedure for winding up of a company. This procedure involves form filing, public notice in the official gazette, etc.

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