Winding up of Company/LLP
Both Companies and LLPs are formed with an object to carry on the business and required to comply with various regulations of Companies Act, Limited Liability Partnership Act. Winding up is a process to bring legal end to a Company or LLP. Such winding up process requires detailed documentation and compliance. There is various reason why a company or LLP be wound up. Winding up process initiated by directors / shareholders is called voluntary winding up.
Winding up brings end to legal structure of the Company, hence as on the winding up date, all the assets of the company will be realized and settle against debt / loan or other financial commitment (includes due to employees, statutory payments & outstanding rent etc.,). Any money available thereafter, will be distributed to shareholders (based on current shareholding pattern).
- Achieved the desired object: Any Company or LLP is incorporated with a specific set of objects of the promoters. Any time during the life of the company / LLP, shareholders feels the desired purpose is achieved, they can windup the Company.
- Unable to pay debts: Generally, promoters think of winding up when the company / LLP unable to pay its debt or meet the financial obligation. Instead of running the company and incurring liability, they prefer settling it with assets is more suitable.
- Lack of business potential: When the company / LLP’s business lost its business / market share, it is preferred to windup instead of maintaining under dormant status.
Closure and winding up are two different events and apply legal. Closure of companies (Voluntary Striking off) prescribed under Section 248 of the companies act and in case of LLP section.
| # | Closure or strike off | Winding up |
|---|---|---|
| 1 | Mandatory for 2 years inoperative in case of Company, 1 year in case of LLP. | No such condition, even an operating company / LLP can apply for winding up. |
| 2 | No asset or liability shall exist at the time of closure. | No such condition, company / LLP can have asset or liability. |
| 3 | After closure, the company / LLP may be revived. | Upon windup, revival is not possible. |
| 4 | Less cost for closure or strike off. | High cost due to more compliance and procedures. |
| 5 | Closure takes appx.3 to 4 months. | Winding up takes appx. 4 to 6 months. |
| 6 | Lesser documentation for closure. | Detailed documentation required for winding up. |
Grounds of winding up
- The company / LLP by special resolution resolved that the company be wound up.
- If the Company / LLP is defaulted in debt / loan repayment.
- Defaulted in filed financial statements or annual returns for the preceding five consecutive financial years.
- The Tribunal has ordered the winding up of the company for Sick companies (Chapter XIX).
- In the opinion of the Tribunal it is just and equitable that be company should be wound up.
6. If the Company / LLP has acted against the interest/ sovereignty and integrity of India, the security of the State, friendly relations with foreign states, public order, decency or morality.
7. Company / LLP have been conducted in a fraudulent manner or company / LLP was formed for fraudulent and unlawful purposes.
Why you need Truzly for Winding Up your Company/LLP
Winding up is a lengthy process and require professional support from the day one to avoid any legal complication. Go with professionals and we deliver the result.Go with professionals while winding up a company to avoid legal issues at the later stage
Truzly professionals are ready to serve you for Winding up of company/LLP and gamut of services
All Inclusive Pricing – No Hidden Fee
-
Just ₹75,000 Only/-
-
Drafting of Petition and filing with NCLT
-
MCA filings for 2 year
-
Board and general meeting minutes for 3 years
-
DIN KYC Filing for all Directors (no limit)
-
Overdue GST return for 1 year
-
Cancellation of GST registration
-
Free document inspection
-
Insolvency professional fee extra
Note:
- Does not include Insolvency professional fee.
- Directors / partners should not be disqualified.
- Fee exclusive of stamp duty, MCA fee, notary and other charges. Any statutory payment viz., GST, Income Tax or duties, penalties to be paid by the client.
FAQ’s and Useful insights on Winding Up:
As per the Companies Act, 2013, the application shall be filed before the National Company Law Tribunal (NCLT) and NCLT after following necessary process, order the company / LLP be would up.
After the filing of petition before the NCLT, the tribunal will appoint an Insolvency Professional (independent practicing professional) to act as liquidator to realize all the assets and settle the liabilities. Fee for IP shall be fixed by the NCLT.
Yes. Partnership firm (other than Limited Liability Partnership) shall be wound up as per the applicable provision of Partnership act and Insolvency Bankruptcy Code 2016.
After filing the winding up petition / appointment of IP initiated, Ex-director of the Company has following obligation:
- To submit the statement of affairs of the company detailing its assets and liabilities.
- To submit all books and records of the company.
- To answer any quires put by the liquidator with respect to the affairs of the company and to provide additional information as and when required.
After realizing all the assets, payment shall be made to various lenders, creditors in the following order, this is called waterfall payment method:
- The insolvency resolution process costs and the liquidation costs paid in full.
- The following debts which shall rank equally:
- workmen’s dues for the period of 24 months preceding the liquidation commencement date
- debts owed to a secured creditor in the event such secured creditor has relinquished security
- Wages and any unpaid dues owed to employees other than workmen for the period of 12 months preceding the liquidation commencement date.
- Financial debts owed to unsecured creditors
- The following dues shall rank equally between and among the following:
- government dues
- debts owed to a secured creditor for any amount unpaid following the enforcement of security interest.
- Any remaining debts and dues.
- Preference shareholders, if any.
- Equity shareholders or partners, as the case may be.