05 October 2013
WHAT IS PROCEDURE OF WINDING UP OF PVT LTD COMPANY INCORPORATE ON MAR-2012 HAVING PAID UP CAPITAL OF RS.1,00,000 AND TILL DATE NO ACTIVITY WAS STARTED ?
05 October 2013
Given below is how you can shut down a private limited company by declaring it defunct in an application to the Registrar of Companies (ROC).
Step 1 The board of the company has to make a resolution to make an application to the ROC for declaring the company as defunct. Two directors of the company must sign this application.
Step 2 -Two directors of the company have to sign an affidavit, which is notarized, that verifies that the company did some business for a period up to date and then discontinued its operations, and has no assets or liabilities.
Step 3 -Two directors have to sign an indemnity bond, that is notarized, which says that should there be any liabilities on the company, such liabilities will be met in full by the applicants even after the name of the company is struck off the register of companies.
Step 4 -The company will have to file the financial statement for the latest year prepared up to a period, which ended one month preceding the date of application. This will be accompanied with a declaration that the statement of accounts submitted gives a true and fair view of the companys financial position.
Step 5 Companies which discontinued their operations, after carrying the same for some period, should file audited financial statement for the period up to which they carried on the business provided that period is of one accounting year or more. Also, if there is any unsecured loan, then a waiver letter needs to be submitted.
If the registrar is satisfied with the application under the current laws, then it will proceed towards striking the name of the company and declaring it as defunct and thereafter publish a notice in this regard in the official gazette.
The terms "Winding up" and "Dissolution" are sometimes erroneously used to mean the same thing. However, they are quite different in their meanings. Winding up is a process whereby all assets of the company are realized and used to pay off the liabilities and members. Dissolution of the company takes place after the entire process of winding up is over. Dissolution puts an end to the life of the company. A dissolution order passed by the Court is like the Death Certificate of the company.
Section 425 provides that a company may be wound up in the following ways:— (a) by the Court/Tribunal, or; (b) by the members voluntarily.
Section 433 provides that a company may be wound up by the High Court/Tribunal,— (a) if the company has by special resolution resolved that the company be wound up by the Court/Tribunal; (b) if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting; (c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year; (d) if the number of members is reduced, in the case of a public company, below seven, and in the case of a private company, below two; (e) if the company is unable to pay its debts; (f) if the Court/Tribunal is of the opinion that it is just and equitable that the company should be wound up; (g) if the company has made a default in filing with the Registrar, its balance sheet and profit and loss account or annual return for any five consecutive financial years; (h) if the company has acted against the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality; (i) if the Court/Tribunal is of the opinion that the company should be wound up under the circumstances specified in section 424G: Provided that the Court/Tribunal shall make an order for winding up of a company under clause (h) on an application made by the Central Government or State Government.
05 October 2013
Circumstances in which a company may be wound up by the Court/Tribunal:
In terms of the provisions of section 433 of the Act, a company may be wound up in any of the following circumstances:—
1.Passing a special resolution Where the company has, by a special resolution, resolved that the company may be wound up by the Court/Tribunal, it may present an application to the Court/Tribunal for winding up.
2. Failure to hold statutory meeting Every public company limited by shares or a public company limited by guarantee and having a share capital is required by section 165, to prepare a statutory report within a period of not less than one month and not more than six months from the date at which the company is entitled to commence business, and send it to the shareholders and the Registrar of Companies duly certified at least 21 days before the statutory meeting is held. The company shall also hold the statutory meeting and shall, inter alia, approve the statutory report.
3 Failure to commence business Where a public company or a private company does not commence business within a year from its incorporation or where a company suspends its business for a whole year, a petition for winding up will lie. It is expected that the public company shall obtain the certificate to commence business within a reasonable time and also take action to commence business. On the other hand, a private company is authorised to commence business immediately on formation. Where in either case the company has not commenced its business within a year of its incorporation or within a reasonable period, it will be a ground for winding up.
4. Reduction in number of members below minimum Where the number of members in a public company is reduced to less than seven or in a private company to less than two and the position continues for a long time, it will be a ground for winding up by the Court/Tribunal.
5 Inability to pay its debts This clause vests a large amount of discretion to the Court/Tribunal to find out whether the company is commercially insolvent and whether there is likelihood of the revival of the company after a set back in business and operations. A company will be deemed to be unable to pay its debts if it is proved to the satisfaction of the Court/Tribunal that the company is unable to pay its debts and in determining whether a company is unable to pay its debts, the Court/Tribunal shall take into account the contingent and prospective liabilities of the company. The Court/Tribunal will draw the presumption that a company is unable to pay its debts if it is shown that the company owes a sum exceeding Rupees One Lakh to a creditor and when the creditor has served on the company, at its registered office a demand to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure the debt to the satisfaction of the creditor.
05 October 2013
7. Winding up on just and equitable grounds Under this clause the Court/Tribunal is endowed with very wide discretion to come to the opinion that it is just and equitable that the company should be wound up. Several circumstances may be posed before the Court/Tribunal. For instance that the substratum of the company has disapproved due to take-over of the business by the Government. [Bombay Gas Co. Ltd. v Hindustan Mercantile Bank Ltd. (1980) 50 Comp Cas 202 (Cal)]; that there is deadlock in management or that in public interest it was just and equitable to order winding up of a company.
8 Default in filing with the Registrar the balance sheet or annual return Under this clause, if a company commits default in filing of the balance sheet or annual return with the Registrar of Companies under sections 159 and 220 of the Companies Act, for any five consecutive financial years, it will be a ground for winding up of the company by the Court/Tribunal.
9 Acting against the interest of the country Under this clause, if a company has acted against the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality, it will be a ground for winding up by the Court/Tribunal.
10 If the company is a sick industrial company and is not likely to become viable in future After making inquiry by the Court/Tribunal and after consideration of all the relevant facts and circumstances and after hearing all the concerned parties, if the Court/Tribunal is of the opinion that the sick industrial company is not likely to become viable in future, it may record its findings and order winding up of the company.
Circumstances in which voluntary winding up may be made:
A company may be wound up voluntarily, in case— (i) where a company is formed for undertaking a fixed object and the articles provide that the company is to be dissolved on the completion of the object, the company may be dissolved voluntarily where an ordinary resolution is passed at a general meeting; (ii) where the proposal is approved by a special resolution passed at the general meeting of the company.
Publication of the resolution of winding up:
Section 485 provides that where a company has passed a resolution for voluntary winding up, notice of the resolution shall be given within 14 days of the passing of the same by advertisement in the Official Gazette and also in some newspaper circulating in the district where the registered office is situated.
Commencement of winding up
In terms of the provisions of section 486 of the Act, a voluntary winding up shall be deemed to commence at the time when the resolution for voluntary winding up is passed by the members.
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