A private limited company has to/ winds up when the purpose with which the company is fulfilled or if the company has become defunct with NIL assets and no liabilities.
According to The Companies Act, 2013
A company is a legal entity and can be close down following the procedures established by the statue only.
The Act lays down the precise procedure to file for closure application for a private limited company. The breakdown is simple and precise with team Legex.
As per the current scenario, there are two methods of filing application for winding up
- Active Companies — or the company where there are assets and liabilities, the application is filed under the Insolvency and Bankruptcy Code 216 (IBC) before the National Company Law Tribunal.
- Inactive companies — or the company that has not been working for the past 2 years and did not commence operations within one year of commencement and has no liabilities whatsoever, can file for winding up procedures by filling up the STK-2 form with a certain amount of government fee. The hassle is avoidable, with the ease of accessing information and processing formalities with Legex.
Methods of Winding-up
There are Three ways to wind up an active Private Limited Company
1. Selling off
It involves transferring the stakes of the company to another person/entity and discharging of shareholders of their rights, shares, and duties. It is selling off of shares of the company.
2. Winding up by the Tribunal
The steps involved are:
- Filing a petition with the tribunal along with the Statement of Affairs of the company. The Tribunal may accept or reject it and may issue a time period of 90 days for passing an order.
- The Tribunal, if felt the need, may issue an order and shall seek filing od objection to Statement of Affairs by the company within 30 days.
- An Official Liquidator is appointed by the Tribunal to review the status quo of the company’s accounts and is required to submit a Draft Report to the winding-up committee for approval. On approval, the Final Report needs to be submitted to pass the official order of winding up.
- A copy of the order is submitted to the Registrar of Company within 30 days and upon satisfaction, the Registrar approves for winding up and strikes the name of the company from the Register of Companies and sends a notice to Official Gazette of India for publication.
3. Voluntary wind up
The shareholders chose to voluntarily wind up under the following situations:
- The Company passes a special resolution upon expiry of the duration of the existence of the company or if any such events occur in respect to which the articles call for dissolution,
- The company passes a resolution for voluntary winding up of the company.
How to do it?
- Pass a resolution in the Board meeting for a voluntary wind up or in a General Meeting for event s as per Articles of Association. Consent of Trade Creditors is also necessary.
- The company files a Declaration of Solvency that needs to be accepted by creditors and the company has to highlight its credibility in the declaration.
- The Declaration is submitted to the Registrar along with Auditor’s report.
- A Liquidator is appointed to begin the winding-up process and will present a draft report in the general meeting and if the majority agrees, the resolution shall be passed.
- The final report and a copy of the statements are submitted to the Registrar and the application is made with the Tribunal.
- Upon final assessment, the Tribunal shall pass an order for wind up and the copy of that order needs to be deposited with the Registrar within 30 days to avoid payment of penalty.
- The Registrar shall make final checks and will strike off the name of the company from the Register of Companies and notify the Official Gazette of India for publication.