Winding Up Of A Company
What is Winding Up of a Company?
Winding up is a method through which the disintegration of a company is brought about and also its assets are realised as well as used in the return of its debts. Once the debts are satisfied then the remaining balance (if in case any) is actually paid back to the members in percentage to the offering made by them to the capital of the company.
Company Liquidation Process or winding up of a company is actually the process by which its life is concluded and its property is directed for the interest of its creditors as well as its members. An Administrator, also known as a liquidator, is chosen and he takes the authority of the company, accumulates its assets, makes payment for its debts and finally allocates the surplus (in case any) among the members as per their rights.
As per Section 2(94A) of the Companies Act, 2013, “winding up” actually means winding up under this Act or also liquidation under the Insolvency and Bankruptcy Code, 2016.
Hence, winding up eventually leads to the disintegration of the company. In between winding up and dissolution, the legal entity of the company is left and it can be sued in the Tribunal of law.
Meaning of Voluntary Winding Up of a Company
The process of Voluntary Winding up of a company actually begins when a company becomes insolvent and is incapable to discharge its liabilities. In order to carry out voluntary winding up for a private limited company, a winding up meeting needs to be called wherein a verdict is given for carrying out the winding up procedure of the company. It is necessary that the creditor’s winding up meeting must be held either on the days fixed for General meeting or on the very next day.
According to the procedure for voluntary winding up of a company in India, a prior notice for this creditors meeting should be sent by post to each and every creditor. It should also be written in the Official Gazette and published in at least two newspapers which are popular in the district wherein the registered office of the company is situated.
Who can carry out the winding up of company?
When a Creditor Issues the Winding Up Appeal
The creditors usually make an effort to retrieve a debt at first by issuing a claim. If in case, this doesn’t conclude in conformity within 21 days and the owed debt is worth more than £750 they can ask a solicitor to assist in issuing a company liquidation process. The Court has to review the petition and if in case, it is accepted then it would be forwarded to the insolvent company.
The Company gets only 7 Days to Act
Once the petition is circulated, one has only a few options to contemplate, but regardless of the course of action you determine to follow, it ought to be done without hesitancy; if in case, the Court awards the winding up order it
will be too late. One has seven days to either pay the debts in full, seek for an arrangement, or involve in an argument with the creditor in case the debts are uncertain or go for voluntary liquidation process.
Bank ought to Freeze the Company Accounts as well as its Assets
Once the plea is publicized, the insolvent company’s bank will become mindful of the situation and will freeze the company’s account in order to restrict the directors from trading and transferring the assets illegally.
When the Winding Up Order is Granted
When the Court authorizes company liquidation process, then an OR (i.e. Official Receiver) will be chosen to act as the liquidator of the insolvent company. At this point there is nothing that can be done in order to stop the company from being liquidated, which essentially means the end of your business.
Voluntary liquidation of company is basically an out-of-court procedure. It is only once that the matters of the corporate person have been altogether wound up and its assets are fully liquidated, then the appointed liquidator can request to the National Company Law Tribunal for its discontinuation along with a final report. Agreeing to the voluntary liquidation of company, the tribunal must also pass an order for its ending and the entity would be adjourned from the date of the order. Voluntary liquidation process should be in best interest of the creditors of the company.
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