Closure of a Company as per Companies Act 2013

Closure of the Company

Winding Up- The Last gulp of air

As per famous saying “Man may go man may come, but Company goes on forever” where Company is a Separate legal entity which come into existence by way of incorporation to flourish more & more  but due to several reasons dissolves by the process of winding up, i.e.; end of the life of Company.

Since in this growing economy and industrialization, Winding up is the the last stage of company in which its existence for past several years is dissolved and all its assets are used to pay off the creditors, shareholders and other liabilities.

As per section 270 of the Companies Act 2013, Winding up can be defined as the process under which the assets of the company are disposed of, the debts of the company are paid off out of the realized assets or from the contributories and if any surplus is left, it is distributed among the members in proportion to their shareholding in the company.

The procedure for winding up of a company can be initiated either –

a)      By the tribunal or,

b)      Voluntary.

Where a company can be wound up by a tribunal in the below mentioned circumstances under Section 271:

1. When the company is unable to pay its debts.

 (a) if a creditor, by assignment or otherwise, to whom the company is indebted for an amount exceeding Rs. 1Lac then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand requiring the company to pay the amount so due and the company has failed to pay the sum within twenty-one days after the receipt of such demand or to provide adequate security or re-structure or compound the debt to the reasonable satisfaction of the creditor;

(b) if any execution or other process issued on a decree or order of any court or tribunal in favour of a creditor of the company is returned unsatisfied in whole or in part; or

(c) if it is proved to the satisfaction of the Tribunal that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the Tribunal shall take into account the contingent and prospective liabilities of the company.

2. If the company has by special resolution resolved that the company be wound up by the tribunal.

3. If the company has acted against the interest of the sovereignity and integrity of India, the security of the State, friendly relations with foreign states, public order, decency or morality.

4. If the Tribunal has ordered the winding up of the company.

5. If the tribunal by any means finds that it is just & equitable that the company should be wound up.

6. If the company in any way is indulged in fraudulent activities or any other unlawful business, or any person or management connected with the formation of company is found guilty of fraud, or any kind of misconduct.

7. If on applicant made by the Registrar or any other person authorised by the Central Government by notification under the Act, the tribunal is of the opinion that the affairs of the company have been conducted in a fraudulent manner or the company was formed for unlawful and fraudulent purpose or the persons concerned in the formation or management of its affairs have been guilty of fraud, misfeasance or misconduct in connection therewith and that it is proper that the company be wound up. 

Where a petition to the Tribunal for the winding up of a company shall be presented by—

(a) the company;

(b) any creditor or creditors, including any contingent or prospective creditor or

     creditors;

(c) any contributory or contributories;

(d) all or any of the persons specified in clauses (a), (b) and (c) together;

(e) the Registrar;

(f) any person authorised by the Central Government in that behalf; or

(g) in a case falling under clause (c) of sub-section (1) of section 271, by the Central Government or a State Government.

And the company can be wound up voluntarily by the mutual decision of members of the company,

Steps for Voluntary Winding up of a company:

1. Convene a board meeting and pass a resolution that 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 date, place time agenda for a General Meeting of the Company after five weeks of this Board Meeting.

2. Issue notice in writing for calling General Meeting of the Company proposing the resolutions with suitable explanatory statement.

3. In general meeting, pass resolution for winding up of the company. The winding up shall commence from the date of passing of this resolution.

4. After that resolution conduct meeting of creditor. If 2/3^rd in value of creditors of the company are of opinion that it is 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 tribunal.

5. Within 10 days of passing of resolution for winding up, file a notice with registrar for appointment of liquidator.

6. 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 newspaper with circulation in the district where the registered office is present.

7. within 30 days of General Meeting for winding up of company, file certified copies of resolution passed in General Meeting for winding up of the company.

8. Wind up affairs of the company and prepare the liquidators account of the winding up of company and get the same audited.

9. Call for final general meeting of the company.

10. Pass a special resolution for disposal of the books and papers of the company when the affairs of the company are completely wound up and it is about to be dissolved.

11. After General Meeting of the company, file a copy of the accounts and file an application to the tribunal for passing an order for dissolution of the company.

12. If the tribunal is satisfied, the tribunal shall pass an order dissolving the company within 60 days of receiving the application.

13. The company liquidator would then file a copy of the order with the Registrar.

14. The Registrar, on receiving the copy or order passed by the tribunal then publishes a notice in the official Gazette that the company is dissolved.

These sections are not notified yet and will be notified shortly.

For more details, contact CS Neha Seth at csnehaseth@gmail.com or call us at 9871903449