In this article, we will discuss winding Up of Companies under Companies Act, 2013 in detail. In Indian Bankruptcy Code a corporate debtor can get liquidated if corporate insolvency resolution process (CIRP) results in negative on a petition filed by-
- Financial Creditor (FC)
- Operational Creditors (OC)
- And Corporate Debtor itself (CD)
But what if, Shareholders, ROC, Central government want to file a petition for winding up of the Company before NCLT, hence these are circumstances other than circumstances covered by Indian Bankruptcy Code, 2016. Winding up of companies will be governed by this Chapter XX of Companies Act 2013.
Various Modes of Winding Up of Companies
- Compulsory winding up of companies under the Insolvency and Bankruptcy Code, 2016 ( due to inability to pay debts)
- Compulsory winding up of companies under section 271 of the Companies Act,2013 ( reason other than inability to pay debts)
- Voluntary winding up of companies under the IBC
- Voluntary winding up of companies not covered by the Insolvency and Bankruptcy Code, 2016
- Dissolution in a scheme of merger under section 230 to 240 of the Act, 2013
- Dissolution by striking off name of a defunct company under the section of the Act, 2013
- Winding up of small companies
- Winding up of unregistered companies under the Companies Act, 2013
- Winding up of Indian business of foreign companies under Companies Act, 2013
Chapter XX of the Companies Act, 2013 consists of sections 270 to 365 related to winding up of Companies
Chapter XX of the Companies Act, 213 has been divided into 4 Parts, as follows:
Part I: Winding up of companies by the Tribunal: Sections 270 to 303
Part II: Voluntary winding up: Sections 304 to 323 (All these sections have been omitted by the Insolvency and Bankruptcy Code, 2016)
Part III: Provisions applicable to every mode of Winding up of companies: Sections 324 to 358
Part IV: Official Liquidators: Sections 359 to 365 of Companies Act.
The provisions of Part I of companies act shall apply to the winding up of a company by the Tribunal under this Act ( ONE AA under 2 acts)
WHO CAN FILE PETITION ?
According to Section 272 a petition to the Tribunal for the winding up of a company shall be presented by-
• The company,
• Any contributory or contributories (the shares were originally allotted to him; or he has held his shares for at least 6 months during the 18 months immediately preceding the commencement of winding up of companies, or the shares have been devolved on him by reason of the death of a member)
A contributory shall be entitled to present a petition for the winding up of companies, notwithstanding that-
i) he may be the holder of fully paid-up shares; or
ii) the company may have no assets at all; or
iii) the company may have no surplus assets left for distribution among the shareholders after the payment of its liabilities.
• All or any of the persons specified in clauses (a) and (b), The Registrar; with previous approval of CG (Company acting against the security of the country etc, Where the affairs of the company have been conducted fraudulently, Non-filing of financial statements or annual returns by the company)
• Any person authorized by the Central Government in that behalf; or In a case falling under clause (b) of section 271, by the Central Government or a State Government
• The Registrar shall submit his views to the Tribunal within 60 days of receipt of such petition.
CONDITIONS TO APPOINT A PROVISIONAL LIQUIDATOR
Before appointing a provisional liquidator, the Tribunal shall-
• Give notice to the company;
• Grant to the company a reasonable opportunity to make its representations, if any.
However, the Tribunal may not give such notice if it is of the opinion that there is some special reason because of which notice need not be given to the company. The Tribunal shall record in writing such special reasons.
DUTY OF NATIONAL COMPANY LAW TRIBUNAL (NCLT)
According to Section 274 of the Companies Act, 2013
a) Where a petition for winding up of company is filed before the Tribunal by any person other than the company, the Tribunal shall, if it is satisfied that a prima facie case for winding up of companies is made out, by an order direct the company to file its objections along with a statement of its affairs within 30 days of the order in such form and in such manner as may be prescribed.
the company shall not have a right to oppose petition and
b) A complaint may be filed in this behalf before the Special Court by Registrar, provisional liquidator, Company Liquidator or any person authorized by the Tribunal, and thereupon the directors and officers of the company liable for such non- compliance, shall be liable for imprisonment upto 6 months or with fine which shall not be less than Rs. 25000 but which may extend to Rs. 5 lakh, or with both.
It is also interesting note that when an order of winding up of a company is passed by the Tribunal, the directors and officers of the company shall, within 30, days, submit to the liquidator, the books of account of the company duly completed and audited upto the date of the order of the tribunal.
DUTY OF LIQUIDATOR
According to section 275(6) It is duty of provisional liquidator or liquidator to file a declaration of independence with tribunal within 7 days of appointment as provisional liquidator or Company Liquidator, he shall give a Declaration disclosing conflict of interest or lack of independence in respect of his, appointment, if any. Such obligation shall continue throughout the term of such
According to section 328 where a company has given preference to a person who is one of the creditors of the company or a surety or guarantor for any of the debts or other liabilities of the company, and the company does anything which has the effect of putting that person into a position which, in the event of the company going into liquidation, will be better than the position he would have been in, if that thing had not been done prior to 6 months of making
winding up application.
TRIBUNAL ACTION BASED ON LIQUIDATOR REPORT
- Fixing time for completion of the Winding up of companies process
- Constitution of sale committee
- Order of investigation and filing of a criminal complaint in case fraud is reported
- Order of Tribunal for protection or preservation of assets