If your company is facing a lot of losses lately, you need to know the provisions of winding up and dissolution. Read on to know more!
Provisions of Winding up and Dissolution: Winding up and dissolution of companies are the two ways in which a company can cease to exist. The winding up is the process by which a company is dissolved, while the dissolution means that it has ceased to exist. There are many reasons for dissolving or winding up a company.
There are several laws and acts that govern these two procedures. The company has to deal with state and federal authorities and the Income Tax Department to continue the process of winding up and dissolution.
If you want to go through the procedure of winding up and dissolution for your company you can contact Vakilsearch. The team of experts will lead you through the process. All the formalities will be done in a smooth and hassle-free way.
If you want to know more about the provisions of winding up and dissolution of a company keep reading.
What Is Winding Up and Dissolution?
When a company decides to close it has to pay all the debts and has to liquidate the funds, this process is known as winding up. This is done under the Companies Act of 2013. When all the company’s assets are distributed and all the other relevant procedures are completed, Winding up is completed.
After winding up, the dissolution of a company is ordered by the National Company Law Tribunal. After the winding-up process when dissolution takes place the name of the company is removed from the registrar of companies. This way the company ceases to exist altogether.
The winding up and dissolution procedures take a lot of time and effort. Removing the existence of a company is not an easy task and includes a lot of legal procedures. Many applications and forms are to be filled out. There are various provisions for winding up and dissolution of a company. In this article, we will talk about these provisions in detail.
The Process Of Winding Up Of A Company
The process of winding up of company is a long one. After the winding up of the company, The dissolution takes place. The person who manages the company’s assets and pays off debts is a liquidator. The liquidator manages all these procedures and makes sure that every step is taken care of.
Winding up of companies can be done in two ways: it can be compulsory or it can be voluntary. When a company initiates the winding-up process and applies for winding up it is called voluntary winding up. However, if the company gets a legal notice for winding up it is a compulsory winding-up process. The compulsory winding-up process is usually initiated by the creditors or the registrar of Companies.
Winding up of companies usually takes place:
- If a company has not paid the debts
- If any fraudulent activities are taking place in the company.
- If the rules of the constitution and Companies Act are being broken by the company
- If the financial statements and the financial accounts of the companies are not clear.
- If the company is bankrupt
The Process of Dissolution
A company is dissolved when the winding-up process is completed. There are some provisions of winding up and Dissolution. Let’s have a look at them.
After the winding up procedure of the companies is completed the dissolution process starts. The National Company Law Tribunal initiates the process of dissolution and soon the company is struck off from the registrar of companies (ROC).
The company might be allowed to carry on the work during the winding-up process but after The dissolution process, the company does not exist anymore and cannot work at any cost.
For the process of Dissolution to start, the company must be done with the winding-up process. The company’s owners must agree to the dissolution of the company. All Debts should be paid off with the help of a liquidator.
After the process of winding up is done and the decision of dissolution is final, the company needs to get a certificate of dissolution. You will also have to make sure that all the taxes are paid by the company. After the winding-up process, an application is filed to the Tribunal by the liquidator. The application has to be submitted within 30 days of winding up the process or else the liquidator is liable to pay a fine.
The Effects of Dissolution of a Company
The dissolution of a company is the process by which a company that has been formed for a particular purpose is dissolved. The dissolution can be voluntary or involuntary. Involuntary dissolution occurs when the directors, shareholders and/or creditors agree to dissolve the company. Voluntary dissolution occurs when the directors, shareholders and/or creditors decide to dissolve the company themselves without any agreement with each other.
The Effects of the dissolution of Companies are as follows:
- The assets and liabilities of the dissolved Company will be distributed among the members in proportion to their shareholding.
- If a member is not entitled to any asset or liability, he will get nothing at all.
- After The dissolution process, no business can be done by the company. The dissolution process leads to the end of the existence of the company.
- The personality and the legal existence of the company are completely terminated and their name is struck off from the registrar of Companies. After the name is struck off the ROC it is published in the official gazette.
Conclusion
Winding up and the dissolution of a company leads to the complete removal of the existence of that company. The company ceases to exist and is removed from all the legal documents.
The process is definitely long and includes a lot of legal procedures. It is good to know how to do it in case you are about to go through this procedure. If you want to go through this process and don’t know where to start, you can contact Vakilsearch. They have an expert team of lawyers and legal advisors that will be available to help you and will solve all your queries.
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