Winding up of Company
The process of dissolving a company is called Winding up. For this, you need to submit an account statement and all the directors should execute an affidavit and indemnity.
Winding Up of Company Features
1. Free from debts after liquidation
2. Avoiding legal action against the company
3. Comparingly low cost charged for liquidation
4. All lease agreements will be cancelled
5. Advantages for creditors
Types of Wind Up
Compulsory winding up: The compulsory winding up of a company can be executed by the order of a tribunal or a court, bypassing a special resolution made by the directors during the company’s board meeting, which proposes a court intervention. Identically, by filing a petition to a court or a tribunal by any official person of the company, if the company has indulged in any fraudulent/unlawful activities, it can be winded up compulsorily.
Voluntarily winding 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.
Process of Wind Up
1. Selling company shares: By selling the majority company shares to another person or entity, the shareholders will avoid the burden of debts. Hence, voting powers, rights, and responsibilities will be laid on the acquired person or the entity.
2. 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 can be executed. Similarly, due to insufficient financial funds or inability to clear the debts, a company can be winded up.
1. PAN card of the company
2. Certificate of closure of the company’s bank account .
3. An indemnity bond, which should be notarized by the directors.
4. Latest statement of company accounts.
5. Statement of accounts related to all assets and liabilities of the company, audited by Chartered Accountant (CA).
6. Proof of approval of the resolution by 3/4th of board members.
7. Application for removing the name of the company.
Frequently Asked Questions
In general, the liquidation process of a company in India can take up to 2 years to complete, since the date of application, in case of compulsory liquidation. It may take less time for a voluntary liquidation process to complete. The duration may vary from company to company, depending on the complexity of the process involved.
No. You cannot liquidate your own company. Only the shareholders of a company can put it into voluntary liquidation. Then, a licensed insolvency practitioner will be appointed as a liquidator and only he can start the liquidation process.
Yes, he can. But, a director is not advised to resign from a company when it is under the process of liquidation. This is more so for a director if he has provided a declaration for solvency. However, if he resigns in an unavoidable situation, he doesn’t need to file the DIR-12 Form as the status of the company is ‘under liquidation’.