Winding up refers to the process of closing a company and
distributing its assets to settle debts. Under the Companies Act, 2013, winding
up can be initiated by the National Company Law Tribunal (NCLT) if the company
is unable to pay its debts. The concept of winding up is covered under Part
I and II of Chapter XX (Sections 270 to 365) of the Companies Act, 2013.
However, after the introduction of the Insolvency and
Bankruptcy Code (IBC), the majority of insolvency-related winding up matters -
especially those based on inability to pay debts - are now governed by the IBC.
As a result, winding up under the Companies Act, 2013 is currently confined to
specific limited situations and modes.
WINDING UP BY TRIBUNAL (COMPULSORY WINDING UP)
Grounds for Winding Up by Tribunal (Section 271)
The Tribunal (NCLT) may order winding up of a company on the
following grounds:
i. Company has passed a special
resolution to be wound up by the Tribunal;
ii. The company has acted against the sovereignty
and integrity of India, the security of the State, public order, etc;
iii. The company has been conducted
fraudulently or for unlawful purposes or in a manner oppressive to members;
iv. if the company has made a default
in filing with the Registrar its financial statements or
annual returns for immediately preceding five consecutive financial
years;
v. When the Tribunal is of the opinion
that it is just and equitable to wind up the company.
Procedure
1. Filing of Petition (Section 272)-
i. A petition for winding up is filed with the NCLT. The petition should be accompanied with grounds for winding up, statement of affairs along with the prescribed fee. The petition is filed in FORM WIN-1 as per Companies (Winding Up) Rules, 2000.
ii. Eligible persons to file:
· The company itself,
· Any creditor or creditors,
· Any contributory or contributories,
· The Registrar of Companies (with
prior sanction of Central Government),
Once filed, the NCLT reviews the petition and may admit it
if it is satisfied that there is a prima facie case for winding up.
2. Admission of Petition and Hearing: The Tribunal evaluates the petition along with the statement of affairs, and issues notices to the company and other concerned stakeholders. After admission of the petition, the NCLT may appoint a provisional liquidator to safeguard the company’s assets while the matter is pending. A hearing is then fixed, where the parties are given an opportunity to present their case.
3. Passing of Winding Up Order: If the Tribunal is convinced that winding up is justified, it passes a winding-up order under Section 273. At that stage, the Tribunal appoints a Company Liquidator and issues directions for publication of the winding-up order through public notice.
4. Appointment of Company Liquidator (Section 275): Tribunal appoints a Company Liquidator from the panel maintained by IBBI. The Liquidator files a Declaration of Independence in Form WIN 7. The Liquidator’s duties include taking custody and control of the company’s assets, maintaining proper records, realising and distributing assets.
5. Intimation of Winding Up Order: After the winding-up order is passed, the NCLT sends a copy of the order to the Registrar of Companies (RoC) within 7 days and to the Company Liquidator and in the Official Gazette for publication. The RoC makes an entry and the status of the company changes to "in liquidation."
6. Submission of Reports and Claims: Liquidator submits preliminary report within 60 days of Winding Up Order (Form WIN-9) and subsequent progress reports every six months (Form WIN-10).
7. Realisation and Distribution of Assets: The liquidator collects and realises assets of the company, pays off the liabilities, distributes surplus (if any) to the shareholders. A dedicated liquidation bank account is also opened and operated with a scheduled bank for handling all receipts and payments during the liquidation process.
8. Final Report and Dissolution (Section 302): Once the winding up is completed, the Liquidator prepares the final report in Form WIN-11 and submits it to the NCLT. If the Tribunal is satisfied, it issues an order for dissolution. This order is then filed with the RoC in Form INC-28. After filing, the RoC removes the company’s name from the register of companies, and the company is deemed dissolved.
Regulatory Body
● The National Company Law Tribunal (NCLT) is the primary authority responsible for hearing and deciding winding up petitions.
● The Registrar of Companies (RoC) is responsible for maintaining the company’s status and records during winding up.
● The Official Liquidator, an officer appointed by the NCLT, manages the liquidation process.
