What is Liquidation and Winding Up ?.
‘winding up’ and ‘dissolution’
FIND LEADING ADVOCATES FOR LIQUIDATION AND WINDING UP
Winding up of a company is the last stage of a company. In the first place, It is the legal process through which a company gets wound up. Moreover, After the winding up and liquidation process the company does not exist anymore.
At this point, all the company assets get sold. The sale proceeds gets allocated towards liabilities of the company on priority basis in this case. Advocate Saravvanan Rajendran law associates is a Corporate law office offering Liquidation and winding up legal services in Chennai.
WHAT IS LIQUIDATION?
Company’s long term commitments and obligations needs settlement during company closure. You need to dispose off all company’s assets. According to law this process needs handling by liquidator.
In case of winding up of solvent business, the asset sale proceeds are first utilized to settle debts. The balance gets distributed among members. When a company is insolvent the asset sale proceeds gets utilized to pay off creditors. Professionals like Insolvency Practitioner are experts in handling liquidation of company’s assets.
DUTIES OF LIQUIDATOR
Once a liquidator enter in this process, he will handle issues as follows
- Selling company’s Assets at best possible price.
- Settle and meet creditors’ claims as prescribed by law.
- Distribute the returns in the order of priority
- Acting in the best interests of the creditors and not directors
WHAT IS WINDING UP OF A COMPANY?
In any case, Winding up of a company is a legal process, in the course of which, the company’s life comes to an end. All the properties of the company get sold.
Members and creditors enjoy the sale proceeds of company’s assets. An overseer, called Liquidator gets appointed. Meanwhile, He takes charge of the company too. He sells assets and pays off debts. If any surplus amount is leftover, the liquidator distributes the same to the members.
TYPES OF COMPANY WIND UP
Sec.270 of the Companies Act, 2013 gives out course of action for company wind up in India. They are two types of company wind up. They are as follows:
- Winding up of company by the tribunal
- Voluntary winding up of a company
WHAT IS WINDING UP OF A COMPANY BY THE TRIBUNAL?
According to the Companies Act of 2013, the National Company Law Tribunal or National Company Law Appellate Tribunal is the authority to close a company. NCLT & NCLAT are the authorities that handle all disputes relating to a company. The following are the circumstances where tribunal orders closure of the company for Liquidation:
- In a case where the company is unable to pay off its debts to creditors
- Company passes a special resolution requesting the Tribunal to wind up the company
- In a case where the company is against India’s sovereignty & integrity/ state security/ friends with foreign countries/ public order / morality / decency
- In a case where the tribunal orders the company wind up under Chapter XIX
- Non-filing of annual returns by the company for past 5 consecutive years
- When the tribunal opines to shut down a company
- In case a company serves unlawful purposes or conducts in fraudulent manner. Also where the person or management has involvement in misconduct or fraud.
WHAT IS VOLUNTARY WINDING UP OF A COMPANY?
The members of a company can also wind up the company under the following circumstances:
- In a case where the company passes special resolution for closure of company
- Where a company passes a resolution for wind up in general meeting. It may be due to expiry of its duration as mentioned in AoA of the company. The wind up resolution could also be due to happening of an event.
WHAT IS THE PROCEDURE IN VOLUNTARY WINDING UP OF A COMPANY FOR LIQUIDATION ?
- Pass a resolution at a company board meeting with at least 2 directors. The directors need to declare that the company is solvent. They need to declare that the company will be able to pay off its debts.
- Convene a General meeting by issuing writ notices and explanatory statement about the board meeting resolution.
- Pass a resolution for winding up in General Meeting. It can be ordinary resolution by majority or special resolution by 3/4th majority.
- After passing resolution, conduct creditors meeting. In case majority of creditors agree with winding up of the company and think it is beneficial for them, them the company’ can start winding up process in voluntary way.
- You need to file a notice with the respective ROC for appointment of liquidator within 10 days of passing general meeting resolution.
- Publish the resolution in official gazette and newspaper within 14 days of general meeting resolution.
- File all certified copies of special or ordinary general meeting resolutions within 30 days of General meeting.
- Close the company’s affairs and prepare liquidators a/cs. Have the same audited.
- Conduct company’s General Meeting
- Pass special resolution in that meeting about disposal of company’s books and documents, when the company affairs are in the process of winding up and ready to dissolve
- Submit accounts and apply for dissolution order with the tribunal within 15 days of final General Meeting.
- When the tribunal satisfy with the company’s accounts and compliance, it will pass dissolution order within 60 days from the date of receipt of the application.
- Liquidator winds up the company and files a copy with the registrar
- Registrar publishes a notice in official gazette stating company’s dissolution and closure.
Top law firm for Liquidation and winding Up legal services in Chennai
Corporate Advocates are necessary, right from business incorporation up to winding up of a company. If you taken up a decision to wind up your company and have further more questions, contact Our Senior Corporate lawyers. Of course, our Corporate attorneys even handle cases of Liquidation and winding up petition by the tribunal.. Above all, Our Corporate Legal consultants will explain about varied available option.