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Winding Up of a Company in India

Legally wind up your company in India with Easyfilings's expert guidance. We handle ROC filings, board resolutions, final accounts, and complete compliance for Private Limited, LLP, and OPC entities.

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  • check_circle Board & Shareholder Resolution Drafting
  • check_circle ROC Filing & Legal Documentation Support
  • check_circle Final Accounts Preparation & Clearances
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What is the Winding Up of a Company?

Winding up represents the formal process of bringing a company's business operations to a close. It signifies the lawful end of a corporate entity's life. The process involves several key actions:

  • Stopping all business activities
  • Selling the company's assets
  • Settling debts with creditors
  • Distributing any remaining assets among shareholders

Throughout the winding-up process, the company retains its legal identity and can continue to participate in legal proceedings.

Modes of Winding Up

Compulsory Winding Up (By the Tribunal): This occurs when a court or tribunal mandates the company's closure. The process typically begins with a formal petition filed before the NCLT.

Voluntary Winding Up: This self-initiated procedure typically begins with the company passing a special resolution in a general meeting. There are two forms:

  • Members' Voluntary Winding Up: Chosen when the company is solvent and fully capable of paying all its debts
  • Creditors' Voluntary Winding Up: When a company cannot pay all its debts and is declared insolvent

Benefits of Winding Up

  • Relief from Debts: Directors are no longer responsible for settling debts after liquidation
  • Protection from Legal Trouble: Avoids legal action from courts or regulatory bodies
  • Cost Savings: Ends ongoing compliance costs and filing fees
  • End of Contractual Obligations: Long-term agreements can be canceled
  • Fair Treatment of Creditors: Ensures transparent handling of creditor claims
  • Strategic Business Exit: Allows directors to explore fresh opportunities

Consequences of Winding Up

  • Loss of Legal Identity: Company loses legal status and cannot enter contracts
  • Asset Liquidation: Assets sold to pay debts, creditors paid first
  • Reputation Impact: May harm creditworthiness and public reputation
  • Tax Clearance Required: Liquidator needs tax clearance certificate
  • Directors' Personal Liability: Possible if engaged in fraud or breached duties

Who Can Apply for Winding Up?

According to Section 272 of the Companies Act, 2013, a petition can be presented by:

  • The company itself through special resolution
  • Contributories (shareholders/members)
  • The Registrar of Companies (ROC)
  • Any person authorized by the Central Government
  • The Central Government or State Government

Documents Required

General Documents:

  • Incorporation Certificate of the company
  • Company PAN and Director's PAN
  • Audited Financial Statements (previous two years)
  • Statement of Company Affairs (assets and liabilities)

For Voluntary Winding Up:

  • Declaration of Solvency
  • Report on Valuation of Assets
  • Special Resolution by Shareholders
  • MGT-14 and GNL-2 forms
  • Indemnity Bond (Form STK-3) and Affidavit (Form STK-4)
  • Bank Account Closure Certificate
  • Last filed Income Tax Return

For Compulsory Winding Up:

  • Petition for Winding Up (Form WIN 1 or WIN 2)
  • Affidavit (Form WIN 3)
  • Statement of Affairs (Form WIN 4)

Winding Up Process

Voluntary Liquidation Process:

  1. Board Meeting & Declaration of Solvency
  2. General Meeting – Passing Special Resolution
  3. Notification to ROC and IBBI (within 7 days)
  4. Public Announcement by Liquidator (within 5 days)
  5. Asset Liquidation and Debt Settlement
  6. Final Report and Dissolution Application
  7. NCLT passes dissolution order

Compulsory Winding Up Process:

  1. Filing the Petition with NCLT
  2. NCLT Proceedings & Advertisement
  3. Appointment of Provisional Liquidator
  4. Tribunal Hearing & Winding-Up Order
  5. Liquidator Appointment & Duties
  6. Asset Realization and Creditor Settlement
  7. Final Report and Dissolution

Fees and Penalties

Voluntary Striking Off (Fast Track Exit):

  • Government Filing Fees: ₹10,000 – ₹20,000
  • Professional Fees: ₹15,000 – ₹50,000

Compulsory Liquidation:

  • Court Fees: ₹50,000 – ₹1,00,000
  • Professional Fees: ₹1,50,000 – ₹3,00,000
  • Government Fees: ₹1,00,000 – ₹2,00,000

Penalties for Non-Compliance:

  • ₹10,000 for company and every officer in default
  • Additional ₹100 per day for continued non-compliance
  • Maximum penalty: ₹2,00,000 for company, ₹50,000 per director
  • Director disqualification for 5 years (if non-filing for 3 consecutive years)

Frequently Asked Questions (FAQs)

Your questions, answered clearly by Easyfilings.

Why Does a Company Wind Up? expand_more

Companies wind up for various reasons, including inability to pay debts, completion of a project, strategic decisions by shareholders, fraudulent activities, or consistent failure to file annual returns.

How to close a company in India? expand_more

To close a company in India, you can use Fast Track Exit (STK-2) for defunct companies, Voluntary Liquidation under IBC for solvent companies, or Compulsory Winding Up through NCLT for insolvent companies. The process involves board resolutions, ROC filings, asset liquidation, and final dissolution.

What are the types of winding up of a company? expand_more

There are three main types: (1) Compulsory Winding Up by NCLT (court-ordered), (2) Members' Voluntary Winding Up (for solvent companies), and (3) Creditors' Voluntary Winding Up (for insolvent companies). Each has different procedures and requirements.

Who can apply for the winding up of a company? expand_more

Under Section 272 of the Companies Act, 2013, the following can apply: the company itself, contributories (shareholders), creditors, Registrar of Companies (ROC), persons authorized by Central Government, or the Central/State Government.

How Long Does It Take to Wind Up a Company? expand_more

Fast Track Exit takes 60-90 days, Voluntary Liquidation takes 6-12 months, and Compulsory Winding Up through NCLT takes 1.5-2+ years. The timeline depends on complexity, number of creditors, and asset liquidation requirements.

What happens to employees during winding up? expand_more

Employees' unpaid salaries and benefits are given priority in the payment hierarchy during winding up. They are paid after secured creditors but before unsecured creditors and shareholders. Employees may also be entitled to notice period compensation and gratuity as per labor laws.

What is winding up under Section 271? expand_more

Section 271 of the Companies Act, 2013 deals with winding up by the Tribunal (NCLT). It outlines the circumstances under which a company may be wound up by the Tribunal, including inability to pay debts, fraudulent conduct, or failure to file returns for five consecutive years.

What is the difference between liquidation and winding up? expand_more

Winding up is the overall process of closing a company, while liquidation is a specific part of it involving selling assets and paying debts. Winding up includes liquidation plus other steps like filing resolutions, appointing liquidators, and final dissolution.

What Is the Difference Between Winding Up and Dissolution? expand_more

Winding up is the process of settling affairs, selling assets, and paying debts. Dissolution is the final legal termination of the company's existence. Winding up comes first, and dissolution is the final step after all affairs are settled.

Can a Pvt. Ltd. company be closed? expand_more

Yes, a Private Limited company can be closed through Fast Track Exit (STK-2) if defunct, Voluntary Liquidation under IBC if solvent, or Compulsory Winding Up through NCLT if insolvent or unable to pay debts.

Which companies are winding up? expand_more

Companies wind up for various reasons: inability to pay debts, completion of business objectives, strategic exits, fraudulent conduct, regulatory non-compliance, internal disputes, or becoming commercially unviable. Both solvent and insolvent companies can wind up.

Are directors liable for winding up? expand_more

Generally, directors are not personally liable for company debts due to limited liability. However, they can be held liable if they engaged in fraud, breached fiduciary duties, violated statutory rules, or allowed the company to trade while insolvent.

What is a voluntary winding up of a company? expand_more

Voluntary winding up is when a company decides to close itself through a special resolution passed by members. It includes Members' Voluntary Winding Up (for solvent companies) and Creditors' Voluntary Winding Up (for insolvent companies). The process is governed by the IBC, 2016.

What are the consequences of winding up a company? expand_more

Consequences include loss of legal identity, asset liquidation to pay debts, potential reputation damage, tax clearance requirements, and possible personal liability for directors if fraud or breach of duty is proven. Shareholders receive funds only after all debts are cleared.

What are the grounds for winding up a company? expand_more

Grounds include: inability to pay debts (creditor demand of ₹1 lakh+ unpaid for 21 days), special resolution by company, fraudulent conduct, acting against India's sovereignty, failure to file returns for 5 consecutive years, or just and equitable reasons determined by NCLT.

Why Choose Easyfilings for Winding Up a Company? expand_more

Easyfilings offers complete winding-up support from board resolutions to final ROC filings. We have IBC & NCLT expertise, provide clear process & timelines, help mitigate legal risks, have an experienced legal team, and offer post-closure assistance with tax clearance and final audits.

Why us
verified 5+ MCA Certified Expert star 100+ Trusted Reviews groups 250+ Monthly Clients location_on Serving All India

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