PROCEDURE OF WINDING UP OF A COMPANY – COMPANY ACT 2013
Each and every company is started with an agenda of growing and multiplying its growth but growth not all the companies are able to do so, some perform well and sustain, some just barely survives but some does not seem to have any chance for and hope and so the business is shut down and the company is winded up.
The section 270 of the Companies act 2013 deals with the modes of winding up of a company, it may either be done by the tribunal or it could be done voluntarily if the company is not performing well by the board of directors.
So first let’s discuss how and when can a company be wounded up by Tribunal. There are certain measures and guidelines provided in the section 271 in the Companies act 2013 which deals with the circumstances under which the company could be wounded up by the tribunal:
(a) In-case the company is unable to pay off its debts,
(b) If the company has, under special resolution, resolved that the company be wounded up by the tribunal,
(c) If the company has ever acted or dealt actions against national interests, sovereignty, or the security of the country or any such instances,
(d) If the tribunal has ordered about the winding up of a company because of certain issues
(e) If the tribunal finds that the company is involved in fraudulent affairs, the company was found misbehaving and misconducting its affairs in the market and involving malpractices
(f) If the company was found manipulating and making defaults in its financial statements or books of accounts to mislead people about its profits and losses of the preceding five years
(g) If the tribunal feels that the company should be wounded up and no longer needed
According to section 272, sub-section (1) of the companies act 2013, the petition for winding up of a company could only be presented by the company, any contributor creditor of the company, the registrar, any authorized person on behalf of the central or the state government, a secured creditor, debenture holder of the company.
The section 273 sub-section (1) of the companies act 2013 defines the power of the tribunal that, it has the official authority on receiving the application or petition of a company for winding up may dismiss the petition with or without any costs, it could make an interim order as it thinks it would be suitable, could appoint a provisional liquidator for the company until the making of the order of winding up, it could make an order for winding up of the company with or without any costs, and it could even take any other order as it may feel fits.
Whenever a petition for winding up of a company is filed before the tribunal by any person or authority except for that company itself, then the tribunal first have to check that whether the petition meets with the requirements and then later it gives an order to the company to present certain documents, its statements of affairs within 30 days of the order given.
When the company is to be wounded up by the tribunal then the tribunal, at the point of passing the order of the winding up of the company has to appoint an official liquidator for the company, the official liquidator must be appointed from a panel that is maintained by the central government that consists of chartered accountants, company secretaries, cost accountants, advocates, etc. If in case the l=official liquidator or the liquidator appointed for the winding up of the company misbehaves or does not work in good conduct, then the liquidator could be removed and a new liquidator could be appointed by the tribunal from the comity maintained by the central government.
Under section 279 sub section (1) of the companies act 2013, when the order of winding up of a company has been passed by the tribunal, then all the pending cases that were dealing with the company or has the involvement of the company must be closed, no new case against the company shall be dealt with the company, but the cases that are being dealt with the company in the high court or supreme court has no relation with it and could continue to go on as it is an exception.
After the liquidator has been appointed by the tribunal, under section 281 sub-section (1) of the companies act 2013. The report has to be prepared and shared with the tribunal dealing with all the required information like cash balances, liabilities, assets, debts and all other essential information related to the company within 60 days of the appointment of the liquidators.
As soon as the order of winding up of the company has been passed by the tribunal, the settlements relating to all the creditors, contributors, etc all the remaining liabilities have to be settled off by the company before its winding up. For that all the assets of the company are taken care of and sold or settled in order to settle the liabilities of the company.
It is written in the section 286 of the company act 2013 that, In case of a limited company, any person who is either the manager or director of the company whose liability is unlimited towards the company are liable to pay off the debts and creditors, contributors even from their own funds and finances which even have no relation to the business until the debt gets paid off, as their liabilities towards the company are unlimited and all the debts of the company are to be settled even if the funds and finances of the managers and directors are personal and not relating to business. So even if everything of the company gets sold and the company gets bankrupt its managers and directors are liable to pay as they had unlimited liability towards the company and the business.
Author: Harsh Chaudhary,
LLOYD LAW COLLEGE 1st year