Closing a business: How to wind up your company
Winding up of a company is defined as the condition when the life of the company is brought to an end . The winding up is the process in which the assets of the company are collected and sold in order to settle all its debts . 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 Different Modes of Winding up a company are –
1. Voluntary winding up
A company may voluntary wind up when it is unable to carry on its business or when the purpose for which it was formed is completed or when it is unable to meet its financial obligations . there are two ways of voluntary winding up –
1. Members voluntary winding up
2. Creditors voluntary winding up
Steps of voluntary winding up a company are -
Step 1: Call a Board Meeting
Convene a Board Meeting with Directors. Pass a resolution with a declaration by the Directors that they have made an enquiry into the affairs of the Company and evolved 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, and time agenda for a General Meeting of the Company after five weeks of this Board Meeting.
Step 2: Pass a Resolution
Issue notices in writing calling for the General Meeting of the Company and 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.
After passing of resolution of winding up of the Company, conduct a meeting of the Creditors. If two third 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 3 : Appointment of Liquidators
Within 10 days of passing of resolution for winding up of company, file a notice with the Registrar for appointment of liquidator.
Step 4: Publication of Resolution
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 5 : Liquidator’s meeting with the creditors
If the liquidator states that company wouldn’t be able to pay its debts in the prescribed period then he shall call a meeting of the creditors and shall lay a statement of assets and liabilities of the company and this would turn out to be case of insolvency.
Step 6 : Final Dissolution
The company liquidator would then file a copy of the order with the Registrar.The Registrar, on receiving the copy of the order passed by the Tribunal then publishes a notice in the Official Gazette that the company is dissolved.
2.Winding up of a company by tribinual
As per 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 Tribunal has ordered the winding up of the company
· 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 is 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 or misconduct in connection and it is proper that the company be wound up.
