Procedure for Winding Up of the Private Limited Company

The winding-up of the Company is done by two processes:

• Voluntary Winding Up
• Compulsory Winding Up (by the NCT)

Voluntary Winding Up of the Private Limited Company

The Voluntary Winding up can be done by passing the special resolution or a resolution in the general meeting of the Company. Voluntary Winding-up depends on the shareholders. The shareholder must pass a special resolution in the board meeting or a resolution in the general meeting that the Company should wound up on expiry of the time period stated in the AOA of the Company or occurrence of any event that has been stated in respect of which it should be dissolved.

The voluntary Winding up of a Company can be done in two ways:

Member’s Voluntary Winding Up

The directors of the Private Limited Company make a declaration that the Company is solvent and present it on affidavit. Such declaration must be made within five weeks preceding the date of the resolution passed for winding up of the Company. The said declaration will be submitted to the Registrar of the Company with the latest profit or loss statement, latest balance sheet and statement of assets and liabilities.

Further steps for Member’s voluntary Winding up:

• Formal declaration by the Registrar of the Company
• Appointment of liquidator
• Collection of assets and payment of debts

Creditor’s Voluntary Winding Up

If the directors do not make a declaration of solvency, then it will be presumed that the Company has become insolvent. So, the creditors have to meet to pass the resolution of winding up the Company.

Steps to be taken for Creditor’s Voluntary Winding up:

• Resolution of winding up to be passed in general meeting
• Meeting of creditors
• Appointment of liquidator or liquidators by the members or creditors
• Incorporation of Committee of Inspection

Procedure to be followed in Voluntary Winding Up of the Private Limited Company:

• Declaration of solvency by Director or Directors in a board meeting, verified by an affidavit that the Company will be able to clear all debts. The date of the general meeting of the board should be fixed five weeks from the date of the board meeting.
• The Director or directors will issue a notice regarding the date fixed for the general meeting.
• An ordinary resolution passed in the general meeting or a special resolution passed with a 3/4th majority.
• After the resolution is passed, there will be Creditor’s meeting, and if 2/3rd of the Creditor will not agree, then there will be no voluntary winding up.
• If the creditors agree, then within ten days from the resolution, the Registrar of the Company will be notified about it.
• Appointment of Liquidator by the Registrar of the Company.
• The liquidator will prepare a report and ask the Company to file a statement of accounts in a general meeting and also send the report to the Tribunal within 14 days of the meeting.
• The Tribunal will pass an order of dissolution of the Company within 60 days.
• The copy of such order shall be forwarded by the liquidator to the Registrar of Company within 30 days of the order.
• Registrar is satisfied, then it will pass an order of winding up of Company.
• The Registrar of Company will publish the order of winding up in the Official Gazette.

Compulsory Winding Up of the Private Limited Company

If the Company registered in India has been indulged in any fraudulent or unlawful activities, then it is compulsorily winded by the National Company Tribunal or the court. The petition for winding up in a tribunal or court can be filled by the Company itself, the Registrar of Company, the creditors of the Company, the Central Government, the State Government or the contributor of the Company.

Procedure to be followed in Compulsory Winding Up of the Private Limited Company:

• The petition for winding up of the Company is to be filed with a statement of affairs.
• The tribunal/court will accept or reject the petition after scrutinizing its credibility.
• A liquidator will be appointed by the Tribunal/court.
• The liquidator will execute all the assets of the Company, examine the book of accounts, etc., and after that will prepare a draft report.
• The liquidator will give the report to the winding-up Committee, and after the approval of the report by the Committee, the liquidator will submit the final report to the Tribunal/court.
• Once the order is passed by the Tribunal/order then, the liquidator will forward the copy of the order to the Registrar of Company within 30 days.
• When the Registrar of Company is satisfied, it will approve the Winding up of the Company and strikes off the name of the Company from the Register of Companies.
• The Registrar of Company will send the notice for publication of Winding Up of Private Limited Company in the Official Gazette.

The Companies (Winding-Up) Rules 2020

Under the Company Act 2019, the Ministry of Corporate Affairs has made the Companies (Winding-Up) Rules 2020 to systemize the procedure of Winding Up of a company under Section 271 and Summary Procedure for Winding Up under Section 361 of the Act, which came in effect from the 1st day of April 2020. The format for different forms is provided under this Rule.