What is Winding Up?
Winding up of a company is defined as a process by which the life of a company is brought to an end and its property administered for the benefit of its members and creditors. An administrator, called the liquidator, is appointed and he takes control of the company, collects its assets, pays debts and finally distributes any surplus among the members in accordance with their rights. At the end of winding up, the company will have no assets or liabilities. When the affairs of a company are completely wound up, the dissolution of the company takes place.
On dissolution, the company’s name is struck off the register of the companies and its legal personality as a corporation comes to an end. The procedure for winding up differs depending upon whether the company is registered or unregistered. A company formed by registration under the Companies Act, 1956 is known as a registered company. It also includes an existing company, which had been formed and registered under any of the earlier Companies Acts.
What is Defunct Company?
Defunct Company is a Company which has not commenced its business within 1 year after receiving certificate of incorporation without any sufficient cause. Also, if a company does not file its Balance Sheet for many years it will be treated as a Defunct Company in the eyes of law.
Points Regarding Winding Up of Company u/s 560 of Companies Act, 1956:
- A Company can be wound up under section 560 of the Companies Act, 1956. For this, the Company should be defunct company i.e. a dormant company with NIL Assets and NIL Liabilities i.e. all the assets should be disposed off and all liabilities should be cleared.
- For this purpose, the Company should prepare audited Accounts for the period ending not later than 30 days from filing the winding up application. Said accounts should show NIL Assets and NIL Liabilities.
- Documents to be submitted to ROC:
- An application signed by minimum 2 Directors in case of Pvt. Ltd. And 3 Directors in case of Public Ltd. (preferably by all the Directors of the Company) (Annexure A);
- Indemnity Bond signed by minimum 2 Directors in case of Pvt. Ltd. And 3 Directors in case of Public Ltd. (preferably by all the Directors of the Company) and Notarised (Annexure B);
- Affidavit signed by minimum 2 Directors in case of Pvt. Ltd. And 3 Directors in case of Public Ltd. (preferably by all the Directors of the Company) and Notarised (Annexure C);
- Signed copy of latest audited Balance Sheet showing NIL assets and NIL liabilities; and
- Certified copy of Board Resolution (Annexure D).
- After the Registrar is satisfied that the Company is defunct and has no assets and liabilities, he will issue notice to the Company for striking off the name from the register giving some time to withdraw the application, if required.
- After the expiry of the time limit, he will issue notice thereby striking off the name of the Company from the Register maintained by him and will send the same to publish in the Official Gazette. Once the said notice is published in the Official Gazette, the Company stands struck off from the Register.