Winding Up Private Limited Company

Every entrepreneur wants their business to flourish more & generate profits, but there are multiple scenarios wherein an entrepreneur has to take the decision of closing down his business. In legal terms, we call it as winding up of a Private Limited Company. It is the last stage of a Private Limited Company in which its presence for the past several years is dissolved and all its assets are used to pay off the creditors, shareholders, and other liabilities.

Importance of winding up of a Private Limited Company

• Avoid compliance
• Avoid any penalties or fines
• Low cost as compared to maintaining compliance for a dormant company

Decision:

If your company is not operating properly or faces continuous business losses, it is advisable to close such a company and look for some alternate business solutions to come up with. A private limited company needs to be closed or windup when there are no activities since incorporation or the Director/s of the company is not willing to continue operations.

• Pass an ordinary resolution or special resolution in General Board of Directors meeting
• There should be no business activity from the day when above resolution is passed
• Declaration by members or stakeholders stating there is no debt pending on the company and the required forms are filed.

Conditions for winding up of company:

As per Section 270 of the Companies Act 2013, the procedure for winding up of a Private Limited Company can be initiated either:-

• By the tribunal
• Voluntary

By the Tribunal:

A Private Limited Company can be wound up by a Tribunal for any of the following reasons:

• The company doesn’t have the revenue to pay its debts and loans
• If the company has not filed its returns or submitted financial statements to ROC for five consecutive years
• If the company has acted against the integrity and sovereignty of the country and has affected against the relationship between neighboring or foreign countries and India
• If the tribunal has decided (by means of any findings) that it is only right to wind up the operations of the company
• If the company or its members have been involved in any fraudulent transactions, been getting financial gain or profits through illegal transactions.

If a Private Limited Company falls under any of the above cases, a tribunal is formed and a resolution is taken to wind up the operations of the company under study. Such tribunal decisions are considered final.

Voluntary:

The decision of voluntary winding up of the company entirely depends on the shareholder's decision. Before winding up a Private Limited Company, the shareholder’s must:

• Pass a special resolution in a board meeting
• In the company annual general meeting, pass a resolution requiring that a Private Limited Company wound up on account of expiry of a duration stated in the articles of association or occurrence of any event in respect it should be dissolved.

• The court or tribunal will initiate the procedure by sending a notice to an official liquidator. This person will be responsible for carrying out the process of winding up the company.
• The court will also create the winding up order and will send it to all creditors and contributors, asking them to step forward. The order is to be served even upon those who’ve filed the petition for winding up.
• The liquidator, appointed by the court, shall examine the books of the company, that is bank balance, liabilities, the cash in hand, creditors, loans etc.
• The official liquidator must, in the next six months, furnish to the court an introductory report on the accounts, liabilities, debtors and cash and negotiable securities available. The liquidator will also initiate if any further inquiry is required.
• The liquidator will present to the Court a complete account of how the money, assets, and operations were divided into all
• After inspection of all the documents and accounts, the court speaks the dissolution of the company.

Decisions a Tribunal may take?

• Dismiss your petition for winding up the company
• Make provisional order as it thinks fit
• Appoint liquidator
• The Final decision on whether to wind up the company or not
• Any other decision required as per law

Procedure to wind up a Private Limited Company voluntarily:

• The majority of directors (or both, in case if there are only two directors) should organize a board meeting at which the decision has to be made to wind up the company. The debts if any on the company can be repaid from the earnings of the winding up of the company. Finally, a date, time and agenda should be fixed for a general board meeting. The general board meeting must be conducted after 5 weeks of holding a board meeting.
• During the general board meeting, pass the ordinary resolution for winding up by the ordinary majority or special resolution by the ¾ majority. The directors must conduct a meeting with the creditors of the company. If 2/3rds of creditors are in favor of winding up the company, then the company shall be wound up voluntarily.
• Within a time span of 10 days of the passing of the resolution, file a notice with Registrar for the appointment of a liquidator
• Within 14 days from the passing of the resolution, notice of the resolution must be given in the Official Gazette and also an advertisement in the district where the registered office is present.
• Within 30 days of General meeting, file certified copies of ordinary resolution and the special resolution passed in the General Meeting.
• Call for the General Board Meeting, at which a special resolution will be passed for disposal of all the books of accounts.
• Within two weeks after last general meeting, file the accounts and special resolution with the Registrar. If the Registrar is satisfied, the dissolution order shall be passed within 60 days of application.

Corpseed Procedure for winding up of a Private Limited

• Step 1: Corpseed received your request for winding up of company.
• Step 2: We will assign a dedicated resource who is professionally skilled in regulations required to wind a Private Limited Company. You can get in touch with the assigned resource at any point of time for consultation and assistance regarding winding up of your company.
• Step 3: Our experts will draft the affidavit for winding your company and ask for your approval.
• Step 4: Our expert will file your latest financial statement, with MCA.
• Step 5: Our resource will assist you till the Tribunal passed an order for dissolving.
• Step 6: The above-mentioned 5 steps will complete your request of winding up your company.