What is Winding Up of a Private Limited Company in India ?
'Winding up of a Private Limited Company in India' is the last resort that is taken up by companies. There are numerous reasons because of which a private limited company can be wound up. Winding up is of two types, viz. voluntary winding up and winding up by Tribunal.
Winding up by Tribunal
As per Companies Act, 2013, Tribunal can order winding up of a private limited company if:
- It is unable to pay off debts.
- The company passes a special resolution in favor of winding up by Tribunal.
- The Tribunal has ordered the company to wind up as it thinks that it is justifiable to.
- The company has acted against national integrity and sovereignty.
- The company has not submitted the audit financial statements of preceding 5 consecutive years.
- The company has conducted unlawful and fraudulent activities.
Voluntary winding up
A company can be voluntarily wound up if:
- It passes a special resolution in favor of winding up.
- It passes a resolution in general meeting and the Articles of Association fixes an expiry date.
Steps of winding up
The steps to voluntarily wind up a company are:
- Conduct a board meeting and pass a resolution in favor of winding up. They must ensure that there are no outstanding debts and if there are any, they will be paid in full.
- They should then schedule a general meeting which should convene within 5 weeks of the Board Meeting.
- In a general meeting pass an ordinary resolution with majority or special resolution with 3/4th majority.
- After passing the resolution it should then conduct a meeting with the creditor. If 2/3rd agree to it, the company should move ahead with the winding up.
- Within 10 days the company must submit an application with Registrar for appointment of liquidator. Within 14 days it should make an advertisement in the Official Gazette and a vernacular newspaper.
- If the Tribunal is satisfied with the winding up then it should approve the application within 60 days of its submission.
- The company will then give an official statement in the which will clearly say that the company now stands dissolved.
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