Winding Up
Winding up of a company is the process of selling all the assets of a business, paying off creditors, distributing any remaining assets to the partners and then dissolving the business. Through this process, the life of a company comes to an end. Winding up may be required due to a number of reasons like closure of business, loss, bankruptcy, passing away of promoters, etc.
The procedure for winding up of a company can be initiated voluntarily by the shareholders or creditors or by a Tribunal. In the case of winding up of a company, an administrator, usually called a liquidator, is appointed and he takes control of the company, collects its assets, pays its debts and then distributes any surplus among the members in accordance with their rights.
As per Companies Act, 2013, a company can be wound up by a Tribunal if the company is unable to pay its debts; has by special resolution resolved that the company be wound up by the Tribunal; has acted against the interest of the sovereignty, integrity and security of the State; has not filed financial statements or annual returns for the past five consecutive financial years; etc.
What it Involves
Appointment of Liquidator
The court will appoint a liquidator for the winding up process. Upon appointment, the powers of the directors would cease to exist and such powers would rest in the hands of the liquidator and he would be responsible for accumulating all the assets of the company and paying off its debts. The surplus would then be distributed among the members.
Documents Required
A liquidator’s statement needs to be prepared, stating that there are no
assets and liabilities except share capital and profit and loss debit balance. An affidavit and
indemnity needs to be executed by all directors. If there are any unsecured loans, a waiver letter
should be submitted.
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