Modes of Winding Up of Companies and their procedure

Introduction:

Companies are completely separate entities as per the law. Therefore, the existence of these companies is different and distinct from the legal existence of its members. Winding up is a process that safeguards the members from facing the harsh consequences of insolvency. This article will detail the details regarding this process and its significance.

What is the winding up of companies?

Winding up is a way to eliminate an organization or organization by auctioning all of its resources, collecting any income, ensuring that lenders are paid about, and allocating whatever is leftover (total assets). Anything leftover can be transferred in cash or kind, first to the interested shareholders, and then to the remaining shareholders. The term extinction is similar to ‘termination’ which is the process of converting goods into cash.

Self-determination as a result of business fraud is defined under section 339 of the Indian Companies Act, 2013 which stipulates that in the event of a corporate closure, it creates the impression that any corporate business has continued with intent to defraud creditors or other individuals or for any fraudulent purpose. The Tribunal, if it deems it appropriate to do so, may announce that any person, director or manager, or company official, or any other persons have been intentionally engaged in doing business in the manner set out above.

Conclusion procedures are governed by the provisions of the Companies Act of 2013 and the Insolvency and Bankruptcy Code 2016. The closure of a company may be dealt with in the manner provided for in Section 270 of the Indian Companies Act, 2013. The following procedures are:

• By the National Company Law Tribunal (NCLT)
• Voluntary Winding Up

Section 248 of the Companies Act, 2013 empowers the concept of writing to remove company names from a company register under good cause.

Modes of Winding Up

By the Tribunal or Compulsory Winding UP

In terms of Section 271 of the Companies Act, 2013, a company may be liquidated by a court under seven conditions, which are set out here –

• If the company is unable to pay pending debts;
• If the company by special decision has decided to close it down;
• If a company acts contrary to the interests of integrity or morals of India, the security of the state, or damages any form of friendly relations with foreign or neighboring countries;
• If the Tribunal approves an order for the company to be harmed under section XIX;
• If the Tribunal concludes that the company was committing fraud or was created for illegal purposes or that people who were previously involved in the formation of the company were guilty of fraud;
• If the company makes a mistake in filing financial statements or annual returns with the registrar for the first five consecutive years;
• If the Tribunal finds that it is fair and equitable that the company is arrested;

Who can file a winding-up petition?

Section 272 of the Act provides that the completed petition may only be submitted to the Tribunal by the aforementioned parties.

• Company
• Debtors; or
• Any donations or donations
• It is a central or state government.
• He is a registrar authorized by the central government. for that purpose

Last order and its Contents

The court, after hearing the appeal, has the power to pardon or make an interim application as it deems fit or may appoint a person to temporarily close the organization until the proper functioning has been completed.

Voluntary Volunteering

The process of volunteering for a company is specified in the Insolvency and Bankruptcy Code, 2016, and applies to the individual company. A voluntary decision to close a company may be made after the approval of its members after which the process of termination of the commencement takes effect. The voluntary opening was made with the intention of stopping work, disposing of its assets, and distributing them while paying off debts.

Procedure to close a company as stipulated under the Insolvency and Bankruptcy Code, 2016

Under section 59 of IBC, 2016 it is stated that the voluntary termination process of an organization, company, business can only be initiated by a corporate person who has made a mistake.

• The directors of the company made the declaration of resignation in an affidavit.
• The board of directors needs to identify a registered debt counselor, who will act as a facilitator and conduct the voluntary liquidation process.
• Call a board of directors meeting.
• A general meeting of shareholders must be convened within 4 weeks of the declaration of solvency.
• A qualified professional specialist submits decisions to the Registrar of Companies and the Insolvency and Bankruptcy Board of India. The voluntary termination process is said to be ongoing from the date of the decision-making process depending on the creditors’ approval.
• A designated paid employer is in charge of the company and has the power to consult with any shareholder who has the right to distribute the proceeds.
• The person who decides to withdraw the money must make a public announcement within five days of the offer.
• The seller must submit an initial report within 45 days of the closing date. The report must be submitted to the company.
• The bank account is opened by the depositor of the organized bank under the name of the company with the words “voluntary closure” to follow, to obtain all applicable funds, and to ensure that the assets meet the cost of liquidation.
• A letter of objection will be received by the locksmith from the local tax authorities where the company’s registered office is located.
• The loan will recover and understand the organization’s resources in a timely manner to increase shareholder equity. Received assets will be stored in a bank account opened for this purpose.
• The proceeds from the interest will be distributed to shareholders.
• The disposal process must be completed by the designated designer within 12 months from the date of the closing date.

After the foreclosure process is completed the seller must prepare a final report to the Registrar and the Insolvency and Bankruptcy Board of India.

An application was made to the National Company Law Tribunal for the dissolution of the company and an order was issued after which the company was dissolved.

Consolidation under “The Fast Track Exit Scheme”

The Department of Cooperatives notified Section 248 of the Companies Act, 2013 on December 26, 2016. The section regulates the power of the Registrar to deregister the Company in the Companies Register. This section provides an opportunity for Unemployed / Unemployed Companies to have their names removed from the Register. It comes as a measure of invitation for large companies to close down part of their companies that are unemployed and avoid annual travel costs.

Conditions on which a registrant may submit a notice and remove a company name:

Section 248 of the Act sets out the circumstances in which an unemployed company may be criticized for its reputation.

• The company failed to start operations within one year of being installed
• The entity does not continue any business or activity for the first two years prior to the financial year.

The company’s procedure for applying to the Registrar by disclosing its name:

The procedure set out above is set out under Section 248 of the Companies Act, 2013.

The Company after having written off all its debts may apply with the INR 5000 / – fees to the Registrar for the removal of the company name from the company register in all or any of the reasons set out in Section 248.

Real-world example of wind-ups

The most recent example of a company concluding with American Motorbike Manufacturer Harley Davidson, Inc. suspending its production and sales operations in India. The company has faced its worst market in the world by selling less than 2500 units in the last financial year and has been operating poorly in the United States of America. The company has done this as part of a reorganization process they call the ‘The Rewire’ strategy. The plan outlined by the company’s President and CEO, Mr. Jochen Zeitz is expected to run for one year from August 2020 and will cost $ 169 Million.

Pierce Leslie & Co. Ltd v. Violet Ouchterlony [1]

The Supreme court held that the process for winding up the company begins before the dissolution. There is no ‘legal provision that provides for the company’s dispersed property to a trustee or which results in removal; escheat law. The shareholders or lenders of a used company cannot be considered its heirs and successors. At the dissolution of the company, its properties, if any, exist in the state.

Conclusion

To Sum up, winding up is the process by which a company’s life comes to an end and its assets are managed for the benefit of its lenders and its members. A trustee is appointed, who is also called the financier, and manages the company’s assets to pay off debts and ultimately transfer any remaining members to its members according to their respective rights.

In Pennington’s name to strengthen the process by which the news and management of the company’s assets are taken from directors, its assets are held by the seller, and its liabilities and liabilities are deducted from recognition results and any other residual assets returned to their members or shareholders. At the end of the closure, the company will have no assets or liabilities and will take legal action for liquidation.

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References

1. [1] Pierce Leslie & Co. Ltd. Vs Violet Ouchterlony, 1969 SCR (3) 203
2. Tripti, Winding Up of a Company, Legal Service India, http://www.legalservicesindia.com/article/1319/Winding-Up-of-a-Company.html
3. Ruchika Jha, Winding up of Company under Company Law, lawtimes journal, (March 3, 2020), http://lawtimesjournal.in/winding-up-of-company-under-company-law/