CS Professional Corporate Restructuring Winding Up and Modes of Winding Up
Wind up means to close or to put an end to something. Winding up of a Company means putting up an end to the life of a company. On wounding up all the affairs of the company are closed, all the assets of the company are sold for the benefit of creditors and members and all the liabilities are paid off. And if any surplus assets are left then are distributed among the members of the company.
Winding up has been defined under Section 2(94A) of the Companies Act, 2013 or Liquidation under the Insolvency and Bankruptcy Code, 2016.
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Modes of Winding up of a Company
The company may be wound up in the following modes:
- Winding up by Tribunal (National Company Law Tribunal)
- Voluntary Liquidation
Winding up by Tribunal
Circumstances under which a company can be wound up by the Tribunal are as follows:
- Inability to pay debts: On the inability of the company to pay debts, Court or Tribunal may order the company to wound up.
- Passing of Special Resolution: If a company has passed a Special Resolution, then the Tribunal may order that the company be wound up. However, the Tribunal is not bound by the resolution so passed by the company. The Tribunal may not order for wound up if finds that the wound up is not in the public interest or not in the interest of the company.
- Affairs of the company are conducted in a fraudulent manner: If on an application made by the Registrar or any other person authorized by the Central Government files a complaint that the affairs of the company are conducted in a fraudulent manner, then the Tribunal may pass the order for the company to be wound up.
- Just and Equitable: The Tribunal may order for winding up if it considers such an order to be just and equitable for the company. ‘Just and Equitable’ depends on the facts of each
- Default in filing financial statements and annual accounts: If the financial statements or the annual returns of the company has not been filed for the preceding continuous five Financial Years, then the Tribunal may order for wound up of the company.
- Against the National Interest: If the company has acted against the national interest then the Tribunal may order for the company to be wound up.
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Who may file the petition for the Winding up?
The petition for wound up may be filed by the following persons:
- The company;
- Any contributory or contributories, contributory means combination of present and past shareholders of the company;
- The Registrar;
- The Creditors;
- Any person authorized by the Central Government.
The provision of Voluntary winding up under the Companies Act, 2013 has now been omitted by the Insolvency and Bankruptcy Code, 2016. Now, Section 59 of the Code deals with the Voluntary liquidation of corporate debtors including companies. A corporate debtor may initiate the proceedings of winding up under several circumstances and if it has not defaulted in the payment of debts.
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