{"id":28411,"date":"2021-04-01T12:19:22","date_gmt":"2021-04-01T06:49:22","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=28411"},"modified":"2022-11-16T14:05:43","modified_gmt":"2022-11-16T08:35:43","slug":"legalities-for-winding-up-of-a-private-limited-company-in-india","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/legalities-for-winding-up-of-a-private-limited-company-in-india\/","title":{"rendered":"Marking the Legalities for Winding Up of a Private Limited Company in India"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Evolving customer&#8217;s taste,\nincreasing competition, limited funds often make life difficult for the\ncompanies. Series of unprofitable years could drive the companies to opt for\nvoluntary winding up.<\/p>\n\n\n\n<p>Closure of a registered\nestablishment in India has to be done through a legal procedure. This write-up\nconsolidates four ways through which a private limited Company can be closed.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/legalities-for-winding-up-of-a-private-limited-company-in-india\/#Sell_Out_of_an_Entity_%E2%80%93_A_Way_of_Voluntary_Winding_Up\" >Sell Out of an Entity \u2013 A Way of Voluntary\nWinding Up<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/legalities-for-winding-up-of-a-private-limited-company-in-india\/#What_is_Mandatory_Winding_up_of_an_Entity\" >What is Mandatory Winding up of an\nEntity?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/legalities-for-winding-up-of-a-private-limited-company-in-india\/#Procedure_Relating_to_Mandatory_Winding_Up\" >Procedure Relating to Mandatory Winding\nUp<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/legalities-for-winding-up-of-a-private-limited-company-in-india\/#What_is_the_Voluntary_Winding_Up\" >What is the Voluntary Winding Up?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/legalities-for-winding-up-of-a-private-limited-company-in-india\/#Winding_Up_of_a_Defunct_Company_as_per_Company_Act_2013\" >Winding Up of a Defunct Company as per\nCompany Act, 2013<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/legalities-for-winding-up-of-a-private-limited-company-in-india\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Sell_Out_of_an_Entity_%E2%80%93_A_Way_of_Voluntary_Winding_Up\"><\/span>Sell Out of an Entity \u2013 A Way of Voluntary\nWinding Up<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Transferring the\nownership of the Private Limited Company to another entity is also a form of\nvoluntary winding up. It can be accomplished by selling shares against the\npredetermined price. Practically, selling off a company through share\ntransactions cannot be deemed as a winding-up method by the virtue of the\nprevailing bylaws.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Mandatory_Winding_up_of_an_Entity\"><\/span>What is Mandatory Winding up of an\nEntity? <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Any registered organization\nin India under the purview of the Companies Act, which is found to be guilty of\nbreaking laws, has to face the compulsory winding up as ordered by the\nTribunal.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Procedure_Relating_to_Mandatory_Winding_Up\"><\/span>Procedure Relating to Mandatory Winding\nUp<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following instructions can be followed for the Mandatory <a href=\"https:\/\/corpbiz.io\/winding-private-limited-company\"><strong>Winding Up of a Private Limited Company<\/strong><\/a>:-<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"998\" height=\"460\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Procedure-Relating-to-Mandatory-Winding-Up.png\" alt=\"Procedure Relating to Mandatory Winding Up\" class=\"wp-image-28426\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Procedure-Relating-to-Mandatory-Winding-Up.png 998w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Procedure-Relating-to-Mandatory-Winding-Up-300x138.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Procedure-Relating-to-Mandatory-Winding-Up-768x354.png 768w\" sizes=\"(max-width: 998px) 100vw, 998px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Filing of Petition&nbsp;<\/h3>\n\n\n\n<p>The petition filing will\nbe done by the following:-<\/p>\n\n\n\n<ul><li>The Company or Trade Creditors&nbsp;<\/li><li>Contributors to the Company or<\/li><li>Any or all of the above mentioned categories or<\/li><li>The Central or State Government or<\/li><li>By ROC i.e., Registrar of the Companies<\/li><\/ul>\n\n\n\n<p>Form WIN 1 or WIN 2 is\ngenerally used for the petition filing. The applicants are required to submit\nthe said Form in triplicate. Before petition filing, the applicant must arrange\nan affidavit in Form WIN 3 which will go along with the same.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Attach the Petition with Statement of\nAffairs of Company<\/h3>\n\n\n\n<p>All the documents annexed\nwith the petition should be audited and verified by a practicing CA. Form WIN 4\nin duplicate must be filed for providing a statement of affairs. The same must\nbe verified by an affidavit in Form WIN 5.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Advertising the Petition for 14 days<\/h3>\n\n\n\n<p>The Company must publicly\nshare the petition in a preferred language via a daily journal for 14 days. To\nserve this purpose, the Company has to leverage the Form 6.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Proceedings of the Tribunal<\/h3>\n\n\n\n<p>The Tribunal will hear\nthe petition on the hearing date; accept replies &amp; objections from the\npetitioner as well as respondent. The Tribunal may appoint a provisional\nliquidator during the legal proceeding.<\/p>\n\n\n\n<p>The appointment order of\nthe provisional Liquidator shall be made in Form WIN 8. Meanwhile, the\nwinding-up order shall be made in Form WIN 11. The winding-up order must\nentail:-<\/p>\n\n\n\n<ul><li>The duty of such individuals to submit the audited books of accounts up to the order&#8217;s date.<\/li><li>Provide the date, time &amp; location for the Liquidator.&nbsp;<\/li><li>Surrender the assets &amp; documents related to assets to the Company liquidator. Post-winding-up order, the Liquidator shall take the custody of Company&#8217;s properties and paperwork. The Company liquidator will then forward a report to the Tribunal within 60 days of the winding-up order&#8217;s date. <\/li><li>After the complete winding up of Company&#8217;s affairs, the Liquidator shall file an application to the Tribunal for the Company&#8217;s dissolution. After being satisfied by the grounds supporting Company&#8217;s dissolution, the Tribunal will issue a dissolution order for the Company, which shall become effective from the order&#8217;s date. The Company Liquidator shall forward the order copy to the registrar within the 30 days of the date of the order,&nbsp;<\/li><\/ul>\n\n\n\n<p>If the Tribunal fails to\nspot an error in account or compliance requirement, the Tribunal will issue the\nCompany&#8217;s dissolution order within 60 days of receiving the application. After\nthis, the registrar will issue a notification in the Official Gazette\nspecifying that such a Company is dissolved.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_Voluntary_Winding_Up\"><\/span>What is the Voluntary Winding Up? <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A company seeking\nvoluntarily winding up has to follow a long list of legal prerequisites.\nFollowing are the scenarios under which voluntarily winding up is feasible:-<\/p>\n\n\n\n<p>The Company passes a\nresolution after the expiration of the timeline for which it is formed, or upon\nthe occurrence of an event that supports winding up as per the article or- The\nCompany passes a special resolution for the same with the approval of at least\n3\/4th of the shareholders. <\/p>\n\n\n\n<p>The winding-up in such\ncases starts Form the date of passing of resolutions cited above. The Company\nis also required to appoint a liquidator in the same meeting. The appointment of\nLiquidator seeks the approval of all the creditors of the Company.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Procedure Concerning Voluntary Winding Up<\/h3>\n\n\n\n<ul><li>The Company passes a resolution as mentioned above in their general meeting. However, most directors must give their consent for the same.<\/li><li>The Winding-up of Company is impossible without the Trade Creditors&#8217; permission.&nbsp;<\/li><li>The Company must make a Declaration of Solvency after taking approval from the trade creditors. Declaration of Solvency must reflect the Company&#8217;s credibility.&nbsp;<\/li><li>The Liquidator is the one who would carry out the winding-up proceedings and draft a report on Company&#8217;s assets, debt, and so on. The report has to be presented before general meeting for approval and passing the resolution for Company&#8217;s dissolution. The Company&#8217;s Liquidator will forward a copy of final account &amp; resolutions to the ROC.&nbsp;<\/li><li>The company liquidator shall file a petition before the Tribunal to avail an order to dissolution of the Company. Upon examining all the facts about winding up, the Tribunal shall issue a dissolution judgment within 60 days of the application. A final order copy must be filed with the Registrar of Companies.&nbsp;<\/li><\/ul>\n\n\n\n<p>The aforesaid procedures\nshall be filed in a standard form &amp; even after the firm gets wind up; its\nname cannot be taken by other applicants for 2 years. The format regarding\nvarious forms and winding-up procedures is mentioned under the Companies\n(Winding-up) Rules, 2020.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Winding_Up_of_a_Defunct_Company_as_per_Company_Act_2013\"><\/span>Winding Up of a Defunct Company as per\nCompany Act, 2013<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In light of the Companies\nAct, 2013, a Defunct Company refers to an entity that has gained the Dormant\nCompany&#8217;s status.&nbsp;Since these institutions lack fiscal accessibility of\nany kind, the Indian Government renders certain relaxation in this regard.<\/p>\n\n\n\n<p>The <strong>Companies Act, 2013<\/strong><sup><a class=\"text-primary\" href=\"https:\/\/www.mca.gov.in\/content\/mca\/global\/en\/acts-rules\/companies-act\/companies-act-2013.html\"><strong>[1]<\/strong><\/a><\/sup> provides Defunct Company with the legal procedure of Winding up. For that, such entities are supposed to file an application in the Form known as STK-2 Form with the Registrar of Companies. The winding-up cannot be possible without the consent of the Companies&#8217; directors and board members.<\/p>\n\n\n\n<p>For the purpose of the\nsaid scheme, a defunct company is known as an entity that has:&nbsp;<\/p>\n\n\n\n<ul><li>Nil asset and Nil liability&nbsp;<\/li><li>No activities have been undertaken post incorporation&nbsp;<\/li><li>Has not been executing business functions since last one year before filing an application under FTE (Fast Track Exit Scheme).<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A company may wind up its affairs if it is finding it hard to carry on its business, or if it was established only for a specific purpose, or if it fails to meet its financial obligation. It is evident from the above that a private limited company&#8217;s winding up is not a straightforward process. There is a lot of legal complicacies involve in the winding-up process.&nbsp;<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/difference-between-winding-up-and-striking-off-a-company-in-india\/\">Difference between Winding up &amp; Striking off a Company in India\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Evolving customer&#8217;s taste, increasing competition, limited funds often make life difficult for the companies. Series of unprofitable years could drive the companies to opt for voluntary winding up. Closure of a registered establishment in India has to be done through a legal procedure. This write-up consolidates four ways through which a private limited Company can [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":28427,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[385],"tags":[1638],"acf":{"service_id":"70"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":6228,"readingTime":5,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/28411"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=28411"}],"version-history":[{"count":17,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/28411\/revisions"}],"predecessor-version":[{"id":50737,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/28411\/revisions\/50737"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/28427"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=28411"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=28411"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=28411"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}