Commencement of Winding Up of a Company by Tribunal under Companies Act, 2013

Winding up a company means closing down and canceling its operations. Under the provisions of the Companies Act, 2013, the winding-up process can be initiated by a Tribunal known as the National Company Law Tribunal (NCLT). The commencement of winding up by the Tribunal involves court proceedings and obligations to ensure a fair and orderly dissolution of the company. The liquidation procedure is not so simple and is very lengthy and time-consuming. It encompasses many complexities and technical matters in its scope. Legal Window is here to make you understand every complexity and help you through technicalities.
In this article, we will discuss the winding up of a Company by the Tribunal under the Companies Act, 2013.

What is the Winding up of a Company by the Tribunal under the Companies Act, 2013?

Winding up a company refers to the process of liquidating its assets, settling its liabilities, and distributing any remaining funds or assets to the company’s stakeholders. This could occur due to various reasons, such as insolvency, failure to meet financial obligations, or when it is just and equitable to wind up the company in the interest of its members and creditors.

The process of winding up a company is a significant event that marks the closure and dissolution of a company’s operations. Under the provisions of the Companies Act, 2013, the winding up of a company can be initiated by the Tribunal, commonly known as the National Company Law Tribunal (NCLT). The commencement of winding up by the Tribunal entails a series of legal proceedings and obligations to ensure a fair and orderly dissolution of the company.

Modes for the Commencement of Winding Up of a Company by the Tribunal

The Companies Act, 2013 provides two main modes for the commencement of winding up of a company by the Tribunal:

• Voluntary winding up and
• Compulsory winding up.

Voluntary winding up occurs when the company, through its shareholders or creditors, decides to wind up voluntarily. On the other hand, compulsory winding up is initiated by the Tribunal based on an application filed by any interested party, such as creditors, shareholders, or the Registrar of Companies.

Voluntary Winding Up of a Company by the Tribunal

In the case of voluntary winding up, the process starts with a special resolution passed by the shareholders of the company. This resolution must be approved by a three-fourths majority of the shareholders in a general meeting. Once the resolution is passed, the company is required to file a notice of the resolution with the Registrar of Companies within 30 days. Following this, a meeting of creditors is convened, and a liquidator is appointed to carry out the winding-up process.

Compulsory Winding Up of a Company by the Tribunal

The compulsory winding up is initiated by filing an application with the Tribunal, supported by valid grounds for winding up. The grounds for compulsory winding up may include the inability to pay debts, just and equitable grounds, or any other substantial default. The applicant must submit the necessary documents and pay the prescribed fee to the Tribunal. The Tribunal then examines the application and, if satisfied, issues a winding-up order, thereby commencing the winding-up proceedings.

Situations for Winding Up by the Tribunal (Section 271)

A company can be dissolved by the Tribunal on a petition filed under Section 272 of the Act. A company may be wound up by a Tribunal on the following grounds–

• If the company has unpaid debts;
• If the company has decided by special resolution that the company will be wound up by the Tribunal;
• If the company’s actions are detrimental to the integrity and sovereignty of India, its national security, friendly relations with foreign states, public order, decency, or morals;
• If the Tribunal has ordered the winding up of the company under Chapter XIX (in the case of a sick company);
• If the Tribunal, on the application of the Secretary or the Government, believes that the affairs of the company have been fraudulently conducted, or that the company has been formed for a fraudulent and unlawful purpose, or that the persons concerned in the formation or management of the company’s affairs have been guilty of fraud, misconduct or wrongdoing in connection whereas, and that it is proper that the company should be dissolved;
• If the company has defaulted in filing its accounts or annual statements with the registrar for the immediately preceding five consecutive financial years; or
• If the Tribunal finds it right and justified, the company must not be winded up.

Appointment of Official Liquidator

Upon the commencement of winding up, the Tribunal appoints an official liquidator to oversee the process. The official liquidator assumes control of the company’s affairs, takes custody of its assets, and conducts investigations and valuations. They are responsible for collecting outstanding amounts, settling liabilities, and distributing the company’s assets to its stakeholders. The distribution follows the priority prescribed by law, ensuring a fair and equitable resolution.

Powers of the Tribunal

During the winding-up process, the Tribunal possesses extensive powers to ensure a transparent and orderly liquidation. It can summon and examine witnesses, order the production of books and documents, and issue directions for the protection of assets and interests of stakeholders. The Tribunal may also take appropriate actions against any officers or directors who have contributed to the company’s winding up through their misconduct or negligence.

Complexity and Guidance

The winding-up process under the Companies Act, 2013 involves various legal requirements, strict timelines, and the involvement of multiple stakeholders. It is a complex and time-consuming procedure that necessitates professional guidance and legal advice. Shareholders, creditors, and the company itself should seek assistance to navigate the winding up proceedings effectively. Professionals with expertise in company law and liquidation can provide the necessary guidance to ensure compliance with legal obligations and facilitate a smooth winding-up process.

Final words

The commencement of the winding-up of a company by the Tribunal under the Companies Act, 2013, marks the initiation of a legal process that leads to the dissolution of the company. Whether through voluntary or compulsory winding-up, the Tribunal plays a vital role in ensuring the orderly liquidation of the company’s affairs and protecting the interests of its stakeholders. By following the prescribed legal procedures and availing professional assistance, all parties involved can navigate through the winding-up process smoothly and efficiently.

In case of any query regarding the winding up of a Company by the Tribunal under the Companies Act, 2013, a team of expert advisors from Legal Window is here to assist you at every step. Feel free to reach us at admin@legalwindow.in.