Winding up and Dissolution of a Company

Winding up means putting an end to the life of a company. It is a legal process by which the company is dissolved. Company being an artificial person, is created by law and hence dissolved by law.

Objective of winding up
The object of winding of a company is to dispose the assets off the company, pay off the debt out of the assets [or from contributions from its members and distribute the surplus if among the members in proportions to their holdings in the company.]

Winding up/Dissolution
Generally, winding up and dissolution are taken as the same. But from legal point of view, there is a difference between the two. The company is not dissolved immediately at the commencement of the winding up order. But on dissolution the corporate status of the company comes to an end. The main difference between winding up and dissolution are as follows:-

Cont
Winding up precedes dissolution. Before dissolution and after the order of winding up the legal status of the company continues and it can be sued in the court of law. But on the dissolution the legal status of the company comes to an end. Its name is struck off from the Registers of the Company by Registrar of the company and it cannot be sued in the court of law.

 In winding up, the proceedings of the winding up are conducted by the liquidator. He realises the assets, pay debts and finally distributes any surplus among the members in accordance with their right. In dissolution no such proceedings are conducted.

 In winding up the liquidator represents the company whereas in dissolution no such representation is made.
In case of winding up the creditors may prove their debt. But in dissolution it cannot be done as the company ceases to exist.

 The order of the court is not necessary in case of winding up of the company as there can be voluntary winding up of the company. But dissolution essentially require order of the court.

Petition for winding up

The National Company Law Tribunal, i.e.; NCLT does not itself wind up the company. An application to the NCLT for the winding up of a company is made by a petition. A petition may be presented by any of the following: 1. By the company 2. By any creditor or creditors; or 3. By any contributory or contributories: or 4. By all or any of the prior whether together or separately; or by Registrar; or

5. By Central Government in that behalf; or 6. By the Central Government or a state Government

Consequences of Winding up order

Intimation to the official Liquidator and Registrar Copy of Winding up order to be Filed with the Registrar Effect on officers and employees of the company Suits stayed Submission of Audited books and Accounts to NCLT

 Effect of Winding up order Official Liquidator to be liquidator

official liquidator or procedure of winding up by nclt

Appointment of official Liquidator a. May be appointed from a panel of professional firms of chartered accounts, advocates, company secretaries, cost and work accountants or firm having a combination of these professional, which the Central Govt. shall constitute for the NCLT; or

b. May be a body corporate consisting of such professionals as may be approved by the Central Government. c. May be a whole-time or part-time officer appointed by Central Government from time to time.

LIQUIDATOR: On winding up order being made in respect of a company, the official liquidator shall, by virtue of his office, become the liquidator of the company. The liquidator should be described by the style of the Official Liquidator of the particular company in respect of which he acts, and not by his individual name.