Company Closure Process in India

There might be several reasons for winding up a company, and that is done by following either of two processes - voluntary winding up and by order of the Tribunal. The order regarding the winding up of the company occurs via Form WIN 11 and prescribes certain details.

What is the Procedure for Winding-Up, a Company in India?

Running any business requires a lot of determination and hard work. But, sometimes even the best of efforts aren’t enough, and things don’t work out the way you wanted them to. In such cases, entrepreneurs might not have any other option to move ahead with the winding up of a company. There might be several reasons someone has to close down and wind up a company. However, the more important question is not why but how a business owner can close down their company. In this article, we will take a look at how the winding up of a company works and when to approach such an idea. 

How does a company shut down? 

The primary ways in which a company can wind up its operations are as follows; 

• Selling off the Company: The voluntary process by which the founders sell shares of the company and dispose of them. Technically, this doesn’t serve as a winding up, but the transfer of majority shares to another individual or business entity leads to the founders being discharged of their responsibilities.  


• Compulsory Winding Up: Any registered company that does a grievous offence or commits an unlawful or fraudulent activity may be asked to compulsorily wind up by a Tribunal as per the Companies Act. 


• Voluntary Winding Up: Entrepreneurs can also choose to wind up a company voluntarily if they wish to do so. Furthermore, there are certain mandatory requirements that companies have to fulfill to qualify for the voluntary winding up. The voluntary wind-up also requires the company to appoint a Company liquidator to handle all the remaining affairs of the company. The criteria that companies have to fulfill are as follows; 
  
  1. The company passes a resolution to dissolve the company. 
  2. The organization passes a special resolution with at least a 75% majority to initiate a voluntary winding up.  


• Defunct Winding Up As per the Companies Act, any dormant or defunct company receives specific relief measures from the government. Since such companies undertake no financial transactions, the government allows them to shut down the company to prevent having to comply with further compliance measures. Such companies enjoy a fast-track procedure that requires only the submission of Form STK-2 with the Registrar of Companies.

What is the procedure for winding up a company in India? 

Step One: First and foremost, the above-mentioned individuals should file a petition for winding up the company via Form WIN 1 or WIN 2. The forms must be submitted in triplicate and should be accompanied by Form WIN 3, which serves as an affidavit. 

Step Two: The applicants must also submit a Statement of Affairs of the company, and all the supporting documents submitted must be audited by a professional CA. The Statement of Affairs must be submitted in duplicate via Form WIN 4, while an affidavit regarding the same will be in the form of Form WIN 5.

Step Three: The applicants must advertise the petition in a daily journal for a minimum of two weeks. The advertisement must be published in both English and the area's regional language and should be filed under Form 6. 

Step Four: A Tribunal will then hear a petition to study objections and replies stated by the respondent and the petitioner, if any. In some cases, the Tribunal may even appoint a provisional liquidator via Form WIN 8. The order regarding the winding up of the company occurs via Form WIN 11 and prescribes the following details:

• Submit audited account books up to a specific date
• Name and details of the company liquidator along with the time, date, and place for liquidation
• Surrendering the company’s assets and documents to the liquidator.

What are the duties of a Company liquidator during the winding up of a company? 

Once the winding-up order is received, the company liquidator will take custody of the company’s assets and properties. They will also take the company’s account books, papers, and actionable claims into their custody. The liquidator will then review these papers and submit a report to the Tribunal within sixty days.