A company winds up when it is struggling in high insolvency, is not active, or is avoiding compliance responsibilities. The winding-up of the company is done either willingly or compulsory by the members of the company. Winding up is the process in which the company’s assets are liquidated by filing winding up petitions. Liquidation involves the collection and then the sale of those assets.
The winding-up of a company works under corporate law as per the article of association of the company. Whether a public limited company is a private company, everyone can be wound up, either compulsory or voluntary.
Story Stages
Procedure Of Winding Up Compulsory
It is the process under the limited liability partnership act. In this, assets of the business are disposed of, and the surplus is disturbed among the partners.
- Filing A Petition
The petition can be filed by the owner or the registrar of the company. On behalf of the company, trade creditors or even any government authority can file the petition for wind up. They must file the petition in the form WIN 1 or 2.
Such a petition is required to be submitted in triplicate. Also, they need to file the WIN 3 form along with the affidavit in the petition.
- Hearing of petition by tribunals
- Discussing or admitting the petition for winding up
- In case it gets admitted by the tribunal, it will appoint a liquidator for continuing the work of winding up.
- Submission of initial reports by liquidator
- Tribunal issues further direct along with the lieu within which the entire proceeding shall be completed.
Winding Up Under The IBC Code
The process of winding up the company under the insolvency and bankruptcy code is as follows:
- The company commits a default of financial debt or operational debt of one crore or more.
- Application to adjudicating authority for indication of insolvency resolution is filed within 14 days.
- The national company law tribunal (NCLT) may accept or reject the application within 14days.
- If the NCLT accepts the application, it goes through certain stages:
- Appointment of Interim Resolution Professional (RP)
- Formation of the committee of creditors ( CoC)
- RP prepares a memorandum of association.
- This memorandum must be approved by 66% of creditors at CoC.
- This whole process must be completed within 180days.
- When approved, the company gets revived.
- If NCLT rejects the application, it passes the order for wind up.
Procedure Of Winding Up Voluntary
The voluntary winding up is done by the members or creditors of the company without any intervention of the tribunal.
- A resolution for winding up is passed, liquidators are allotted, and their remunerations are fixed in the general meeting.
- The company must be declared solvent so that the creditors do not stop their trade with the company till the wind-up.
- Appointed liquidators must prepare the report of all assets and liabilities for wind up.
- Within 14 days of passing the resolution, the acceptance or rejection can be done.
- The tribunals must complete their entire process of acceptance and rejection within 60 days.
- If rejected, a winding-up order is issued by the court for the company.
Documents Required For Winding Up The Company
The necessary documents required for winding up the company are as follows:
- Certificate of company’s incorporation
- Memorandum of association
- Articles of association of the company
- Certificate for closure of company’s bank accounts
- Statement of affairs of the company
- Advertisement in various fields
- Affidavit
- Copy of board resolution
- Certificate of appointment of liquidator
- Winding up petition forms
Hence, we understand that the procedure of winding up the company is done as per the companies act of 2013. The winding-up of a company is done when the business is incapable of functioning normally. Everything gets sold out in order to pay the debts of the company. So, the above-given procedures are followed when the company winds up working.
