Employees & Workmen: What Happens When the Winding-Up Order Is Passed?

Winding up also has an immediate human impact.

Under Section 277(3), a winding-up order is deemed to operate as notice of discharge to the officers, employees and workmen of the company, except where the business of the company is continued.

The financial consequences must then be properly determined.

Relevant amounts may include:

• unpaid wages and salaries;
• accrued holiday remuneration;
• gratuity;
• provident fund;
• pension or welfare-fund dues;
• compensation;
• contractual dues; and
• other amounts payable on cessation of employment.

The Act gives particular protection to workmen's dues under Section 326, while Section 327 deals with specified preferential payments, including certain employee-related payments.

Practical issue

It should not end with:

“Employees have been paid.”

Main takeaway

Winding up closes the company, but it must also properly close the company's employment obligations.

This Article has been compiled by Shallu Garg (Senior Associate).