Overview

Winding up is the liquidation of Company's assets which are collected and sold in order to pay the debts incurred. When the company winding up takes place firstly the debts, expenses and costs are paid away and distributed among the shareholders. Once the Company is liquidated it is formally dissolved and the Company ceases to exists.

Winding up is the legal mechanism to shut down a company and cease all the activites that re carried on. After the Company winding up the existence of the Company comes to an end and the assets are monitored so that the stakeholders interest is niot hampered.

A Private Limited Company is an artificial judicial person and requires various compliances if the company fails to maintain these compliances there are fines and penalties or even disqualification of the Directors from further incorporating a Company. It is always a better to wind up a company that has become inactive or where there are no transaction.

The shareholders of the Company can initiate the winding up of the company anytime. If there are secured or unsecured creditors or employees on roll then all the dues need to be settled. After settling the dues it is necessary to close all the Compamny bank accounts. The GST registration must also be surrendered in case of Company wind up. Once all the registration are surrendered the winding up application petition can filed with the Ministry of corporate affairs.

Get Started to Wind up Pvt Ltd/OPC Company

Checklist for Winding up of Company

• Board meetings should be convened for the approval of winding up a company
• The appointment of an official liquidator or insolvency professional should be made
• Simultaneously, an NOC should be obtained from the Income Tax Department
• Before initiating a wind-up process, an intimation should be conveyed to the Insolvency and Bankruptcy Board of India (IBBI) within 7 days from the date of approval of the resolution
• An announcement should be made to the public within 14 days of passing the wind-up resolution in an official gazette, one english newspaper and one local newspaper, where the registered company has been based
• The whole winding up process should be completed within 12 months from the initiation of the liquidation

Benefits of Winding up of Company

• Free from debts after liquidation: Once the liquidation process is over, the directors and all company officials are free from all creditor liabilities and pressure
• Avoiding legal action against the company: If the resolution is passed voluntarily by directors, they will neglect legal action taken by the court or the tribunal, and provide a platform to company directors to concentrate on other business opportunities
• Comparingly low cost charged for liquidation: The costs or expenses involved in the liquidation process are relatively low, as charges will be applicable on the sale of assets
• All lease agreements will be cancelled: If any company or entity has entered into a lease for a prescribed time, during the liquidation process, it will terminate all the terms and conditions of the lease. If any penalty has to be paid, it will be deducted from the sale of assets
• Advantages for creditors: After a prolonged struggle, creditors will benefit from the liquidation process as they will be eligible for a default payment, with respect to the proposition of credits given by all creditors.

Documents Required for Winding up of Company

• PAN card of the company
• Certificate of closure of the company's bank account
• An indemnity bond, which should be notarized by the directors
• Latest statement of company accounts
• Statement of accounts related to all assets and liabilities of the company, audited by a chartered accountant (CA)
• Proof of approval of the resolution by 3/4th of the board members
• Application for removing the name of the company

Procedure to Wind up Private Company

Winding up of a private limited company can be done in 2 different ways. They are:

• Voluntary wind up:
  Voluntary wind up can be commenced either by special resolution or a resolution taken during a general body meeting. By violating any of the terms and conditions of the Memorandum of Association (MOA), the winding up can be executed. Similarly, due to insufficient financial funds or the inability to clear debts, a company can be wound up. The company requires a resolution from the directors to sell off all assets of the company or to transfer the stakes to another entity.
• Compulsory wind up:
  The compulsory winding up of a company can be executed upon the order of a tribunal or a court by passing a special resolution proposing a court intervention made by the directors during the company's board meeting.

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