Private Limited Company Winding Up By Tribunal
There are numerous methods to wind up a private limited company in India including promoting the agency, obligatory closing up, closing the company voluntarily, and finally the defunct company.
Closing down a private limited company is tedious, but a vital system. Without doing so, you’ll want to yearly meet the necessities of the Registrar of Companies (because of this spending cash on audits and compliances). The larger cause you’ll need to do this, of course, is as it releases the belongings and investments made with the aid of using you. The system for finishing up a company may be initiated voluntarily with the aid of the shareholders or pressured with the aid of using a tribunal or a court.
Voluntary Winding-up of a Company
When Shareholders Can Wind Up a Company?
To initiate a liquidation process for a company, shareholders must:
Passed a special resolution at the board of directors
To make a resolution at the general meeting requesting the dissolution of the company due to the expiration of the period stipulated in the Articles of Association (AoA) or the existence of the conditions stipulated in the Articles of Association (AoA).
Procedure For Winding Up
A majority of the directors (or both if there are only two directors) must convene a board of directors to declare that the company has no debtor that can repay the debt from the proceeds of the dissolution of the company. Finally, the date and agenda of the board of directors should be set five weeks after the board of directors and an invitation to the meeting should be issued with appropriate explanations.
On the day of the General Assembly, a simple majority ordinary resolution or a 3/4 majority special resolution will be passed. Directors must meet with the creditors of the company immediately. If two-thirds of the creditors agree to dissolve the company, they can voluntarily dissolve. Otherwise, the court must dissolve the company.
Within 10 days of the adoption of the resolution, the Registrar of Companies must be notified to appoint a liquidator. The powers of the directors will be vested in this person and he will be primarily responsible for the accumulation of all the assets of the company and the repayment of the company’s debts. The surplus will then be distributed to members.
Within 14 days from the date of adoption of the resolution, the notice of the resolution must be posted in the Official Gazette and advertised in the district where the head office is registered.
Within 30 days of the adoption of the resolution, a statement of accounts must be prepared, showing no assets and liabilities except for equity and the debt-side balance of profit and loss. The affidavit and indemnity must be signed by all directors. If there is an unsecured loan, a waiver letter must be submitted.
Convene a general meeting of the board of directors, in which a special resolution will be passed to deal with the accounts.
Within two weeks, submit special accounts and solutions to the Registry. If the Registrar is satisfied, he will order the company to close within 60 days.
Closure By a Tribunal
The Companies Act 2013 contains several new rules for closing a company, updating those contained in the Companies Act of 1956.
One of the main reasons is that the law states that a company can be liquidated by a court for one or more of the following reasons:
If the company is unable to repay the debts/loans;
If the set-up (the company) has a resolution that it may be dissolved or wind up by the court under certain conditions;
In addition, if the company fails to declare or file financial statements for five consecutive years;
If the company has acted against the integrity and sovereignty of the country and interfered with neighboring or foreign relations with India;
If the court has decided (by conclusion or by Chapter XIX) that it is only right to wind up the company’s activities;
In addition, if the company or its members have engaged in fraudulent transactions, obtained financial profits through illegal transactions, or if the company has obtained profits by fraudulent means ;
In all of the above cases, a court was established and passed a resolution to wind up the activities of the company under consideration. The decisions of this court are considered final and upon hearing the order, Form 11 is issued for winding-up.
Procedure For Winding Up By Court or Tribunal
The court or arbitrator will initiate the proceedings by sending a summons to the official liquidator. This person will be in charge of the company and carry out the company liquidation.
The court will also prepare a liquidation order, which will be served on all creditors and contributors, asking them to be released. Orders must be executed even for those who have filed petitions for liquidation
The liquidator, appointed by the central government, examines the company’s books, cash, bank balances, liabilities, creditors, loans, etc.
Within the following six months, the official liquidator must provide the court with a preliminary report on the accounts, liabilities, debtors, cash, and available securities. The liquidator will also indicate if an investigation into the company is necessary
In the absence of an investigation, the liquidator must ensure that the available funds are distributed fairly to all creditors until exhausted. The liquidator will present to the court a complete account of the distribution of funds, assets, and transactions.
After examining the accounts, the court ordered the dissolution of the company.
Hi, I am Noorshaba Mirza and I am a self taught blogger, I am a Law student and I love writing and learning as “Learning never exhausts the mind.” and I have written many research paper. As writing express and connect to various things so never stop exploring and spreading knowledge.