What do you mean by Winding-Up?
Winding-up happens to be a circumstance where the life of a company has ended and property is administered so as to benefit the shareholders & creditors.
Form of Winding-Up
By court ( NCLT)/ mandatory Winding-up
Voluntary Winding-up (provisions regarding voluntary winding-up have been abrogated and has now been moved to Insolvency & Bankruptcy code).
Voluntary Winding-Up: The Insolvency and Bankruptcy Code, 2016 regarding re-organization and insolvency resolution of companies, partnership firms and individuals in a timely way.
The Insolvency and Bankruptcy Code, 2016 pertains to substances regarding the insolvency and dissolving of a company where the least amount of the defaulting is Rupees one lakh at present but it might be hiked up to Rupees one crore by the Government, via notification).
Compulsory (Tribunal) winding up
The winding up procedure is carried out by the tribunal. Also called tribunal winding up, this procedure is single-handedly performed by the tribunal and the company has minor or zilch say in the process. Hence, a company will be reduced to a mere spectator and will not follow any directions.
Conditions regarding voluntary wind up:
- If the Company is not able to pay back its debts.
- A special resolution will be passed by the company for closure.
- If a company acts contrary to the principles/interests/sovereignty of the nation.
- If the company has jeopardized ties with other nations.
- If financial statements or annual returns for the last 5 years has not been filed.
- If the tribunal deems it fit and fine to dissolve the company.
- If the company has been involved in illegal business or illicit practices.
- Any member, part of the founding committee of the firm, is found guilty of wrongdoing.
Manners of Dissolution
Liquidation of an enterprise could be executed in any of the following ways:
By transfer of a company’s undertaking to some other as per a scheme of reconstruction or amalgamation, in such a scenario, the transfer or entity will be dissolved by an order of the Tribunal without wind up; and
With the liquidation of the company, whereby assets of the company are liquidated and given for paying its liabilities. The rest, if any, is distributed among the members of the company, in line with their rights.