How to wind up a Private Limited Company?

What is a private limited company?

The Private Limited Company is a type of business owned in private. The business shares are only sold to the shareholders. In India, about 93% of the companies are registered under the Private Limited Company.

Privileges of the Private Limited Company

  1. The private limited company is recognized by the company name, shares, directors, formation, meeting, and number of members.
  2. It lies between the partnership.
  3. Provides legal protection and liability to the shareholders.
  4. Don’t have the authority to invite the general public for subscribing to their securities.
  5. The Private Limited Company has a team of 200 members.

How to wind up a Private Limited Company?

To wind up a private limited company requires long procedures. It can occur in 2 different ways based on the circumstances revolving around the same. If the winding-up is done at will with the consent of all the Board members, it is known as Voluntary Winding-Up and if the Winding-up is forced by the concerned authorities due to some legal issues, it is known as Compulsory Winding-up.

Voluntary winding up

The company can be voluntarily wind up in the mentions situations:

  • The company must pass a special resolution with the approval of ¾th of the shareholders for winding up of the company.
  • In this general meeting, the company must pass a resolution on the expiry of the duration for which it is formed.
  • The company must elect a company officer (liquidator) in the same meeting. The majority of the shareholders must confirm the appointment.

Procedure:

  • The directors along with the company members should agree on winding up. Then the company passes the resolution in the general meeting.
  • The opinion of the Trade creditors is also required for winding up the company. 
  • The Trade creditors should state that they don’t have any burden with the winding up of the company. 
  • The Private limited company has to make a Declaration of Solvency.
  • The trade creditors of the company must accept the Declaration of Solvency.
  • The company has to show the Company Credibility in the Declaration of solvency.
  • The company officer or liquidator will take the winding up the process further on debts, assets, and properties.
  • Before the general meeting, the report will be arranged for permission.
  • The liquidator will send the paper of the final account of their company and explanations to the ROC.
  • The liquidator will also make a petition to the Tribunal for an order of winding up of the company. 
  • After the satisfaction of winding up, the Tribunal will pass an order of abolishment within 60days of this petition. 
  • With the ROC a copy of the final order must be filed.

Compulsory winding up

Tribunal Procedure:

  • The invitation will be filed by:
  1. The Central or State Government.
  2. Trade creditors.
  3. Contributors to the company.
  • The documents along with the application must be audited by a practicing CA. The opinion states by the Auditor the Financial Statement should be unqualified.
  • The affidavits or the declarations of affairs must be in Form WIN 4 in duplicate, which should be verified by evidence in Form WIN 5.
  • The application should be publicized in a daily journal for at least 14 days. 
  • The advertisement should be carried out by Form 6 and the language must be regional or in English.
  • The Tribunal will hear that application on the hearing date. 
  • If the Tribunal wants, it may nominate a provisional liquidator and make in Form WIN 8.
  • The order or winding up will be made in Form WIN 11. 
  • The company officer of the liquidator will take all the assets and property for custody. 
  • The liquidator will provide a report to the Tribunal within 60 days before winding up.
  • After the affairs of the company have been completely dissolved, the liquidator will report to the Tribunal for winding up of the company.
  • Within 30 days, the liquidator will forward the copy of the order to the registrar.
  • If the Tribunal is satisfied with the account order and all the necessary things provided. Then the Tribunal will pass an order for winding up.
  • After passing the order, the registrar will deliver a report to the Gazette Official stating that such a company is winded up.

Conclusion:

The legal winding-up is necessary to avoid future complications and it is only fitting to follow the proper protocols because every step is important in itself. There are certain rules laid down to carry out any work in the country and knowing & implementing them properly is your moral duty!

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