Winding UP Company
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 not 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.
- Voluntary Winding up of a Company
1) The company passes a special resolution for winding up the Company.
2) The Company in general meeting passes a resolution which requires a company to wind up voluntarily as a result of the expiry of the period of its duration, any as per the Articles of Association or on the occurrence of any event in respect of which the articles of association provide that the company should be dissolved.
- Compulsory winding up of a Private Limited Company
Tribunal is responsible for this kind of wind up of Companies.
Here are the reasons for the same:
1) Unpaid debts of a Company
2) When a special resolution is passed fort winding up
3) An unlawful act by a company or the management of the Company
4) If the company is involved in fraudulent acts or misconduct 5) If the annual returns or financial statements are not filed for five consecutive years with the ROC
6) The Tribunal is of the view that the company should windup.
- A private Limited Company is a legal entity established under the Companies Act. Therefore, a company is required to maintain the regular compliances throughout the life cycle.
- The process of winding up is for a Company that is not active and avoid the compliance responsibilities.
- A company can also be closed by filing an application with the ministry of corporate finances in about 3 to 6 months. This process can happen online enitrely. The process for closing a company is fast and easy if done through Indiafilings.
- If a company doesn’t file the compliances on time incurs fine and penalty including debarring the Directors from starting another Company. In that way it is better to windup a company that is inactive and avoid the potential fines or liability in future.