Winding up of the Company is a prISOn mechanism of completely shutting down a business enterprise. It is a manner by which the Company's corporate existence involves a cease post which the Company is going in for dissolution below the surveillance of a Liquidator. The Liquidator video display units and administers the Company's property all through this crucial degree of the Company's lifetime, to make certain the stakeholders' interest is not hampered. Ultimately, dissolution kicks in, wherein the Company is dissolved and the call is struck off by way of the Registrar of ComPANies. Hence, the Company's life involves a stop.
Evolution of Winding Up Laws
The provisions of completing for the first time we're introduced into the prISOn fraternity via the ComPANies Act, 1956, and later have been retained via the ComPANies Act, 2013. Under the ComPANies Act, 1956 there were three modes of completing:
Winding Up by Court or Compulsory Winding Up;
Voluntary Winding Up and
Winding Up difficulty to the supervision of the Court
But via the ComPANies (Second Amendment) Act, 2002, the 1/3 provision changed into overlooked, and the word 'Court' turned into substituted with the aid of 'Tribunal'.
A situation under which an agency is not able to pay its debts used to fall underneath the category of finishing up via Court. The Company's lack of ability to pay money owed was considered while it failed to repay debt amounting to more than Rs.500 (Five Hundred Rupees), which become subsequently modified to a sum exceeding Rs.1,00,000 (One Lakh rupees) through the ComPANies (Second Amendment) Act, 2002.
Under any such scenario, the lenders initially used to problem a call for observing, which the Company needed to reply within 21 days. Still, if the Company fails and neglects to pay the due quantity, the winding-up lawsuits would initiate.
The ComPANies Act, 1956 turned into revised, and an amended ComPANies Act was added because the ComPANies Act, 2013 ('Act'), but the finishing up provisions remained equal, until the Legislature brought the new Code i.E. Insolvency and Bankruptcy Code, 2016 ('IBC/ Code'). Interestingly, neither the ComPANies Act, 1956 nor the ComPANies Act, 2013 ever described the time period winding up. It became only on fifteenth November 2016; a definition section became inserted underneath the ComPANies Act, 2013, whilst IBC became brought, as Section 2(94A) of the Act, which now defines winding up as "polishing off under this Act or liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable."
Winding Up Under ComPANies Act, 2013
Prior to IBC, businesses had been wound up beneath the Act thru the following modes:
Voluntary Winding Up
Compulsory Winding i.E. Winding Up by using Tribunal
Voluntary finishing up and polishing off by way of Tribunal at the ground of inability to pay money owed had been left out from the Act and located underneath the Code under Section fifty-nine and Sections 33 to 54, respectively. Simultaneously, polishing off via the Tribunal, aside from the inability to pay money owed as consistent with Section 271 of the Act, Section 255 of IBC have also been amended following Schedule XI of the Code. Presently, there are 5 situations mentioned below phase 271 of the Act, below which completing by way of Tribunal may be performed. The situations for submitting a petition of winding up are:
If the Company through unique decision has resolved that it need to be wound up via the Tribunal;
If the Company has acted towards the interests of the sovereignty and integrity of India, the safety of the State, pleasant relations with foreign States, public order, decency and morality;
If on an application made by the Registrar or every other person authorized via the Central Government by means of notification beneath this Act, the Tribunal is of the opinion that the affairs of the Company were performed in a fraudulent way or the Company changed into shape for a fraudulent and unlawful cause or the folks worried in the formation or control of its affairs have been responsible of fraud, misfeasance or misconduct in connection therewith, and it's far-right that the Company be wound up;
If the Company has made a default in submitting with the Registrar its economic statements or annual returns for without delay previous 5 consecutive financial monetary years; or
If the Tribunal is of the opinion that it's miles simply and equitable that the Company must be wound up.
According, to section 272 of the Act, the following shall gift the petition for winding up of the Company:
Company: it is able to present the petition if a unique resolution is handed to that effect.
Contributory or Contributories: it may present the petition, notwithstanding, that he is the holder of absolutely paid-up shares, or that the Company may additionally haven't any property at all or might also haven't any surplus property left for distribution a few of the shareholders after the pleasure of its liabilities, and stocks in recognize of which he is a contributory or some of them were, to begin with, allocated to him or have been held by him and registered in his name, for as a minimum six months during the 18 months right now earlier than the commencement of the winding-up of the shares had been devolved on such contributory due to demise of a former holder.
Registrar: it can present the petition after obtaining approval of the Central Government, wherein the Central Government should provide an affordable possibility to the Company earlier than granting such sanction to the Registrar. The Registrar can report a petition beneath phase 271 (b) to (d) i.E. While:
The Company acts towards the safety of the country; or
The affairs of the Company has been conducted in a fraudulent manner; or
The Company fails to record monetary statements or annual returns
Any person authorised by way of the Central Government or by using the Central Government or a State Government: a petition can be filed in a case beneath Section 271(b) i.E. Where the Company acts towards the interest, protection of the State.
This segment clarifies that a copy of every petition made to the Tribunal for finishing up shall also be supplied to the Registrar, to which the Registrar shall post its view within a length of 60 days of receipt of the petition.
The Tribunal under section 273 of the Act can bypass following orders on receipt of a petition for polishing off of the Company, by any of the folks authorized as according to segment 272 of the Act:
Dismiss the petition (without or with prices);
Make an interim order, as it thinks suit;
Appoint a Provisional Liquidator, until the making of a winding-up order;
Make an order for Winding Up (with or without charges); or
Any other order, because it thinks suit
Further such an order has to be made within a length of 90 days from the date of presentation of such petition. The Act additionally empowers the Tribunal to provide the Company with an inexpensive possibility to make its representation, earlier than appointing a provisional liquidator.
It is to be stated that the Tribunal shall now not refuse to make an order of completing simplest at the floor that the belongings of the Company have been mortgaged for a quantity identical or greater than the one's property, or that Company has no assets.
The Tribunal would not randomly order liquidation while a petition is filed under the ground of just and equitable. Instead, it appears into other treatments available to the petitioners in preference to simply searching for an unreasonable comfort of completing of the Company.