Winding Up a Private Limited Company
Winding up a private limited company is a tedious, but necessary, procedure. Without doing so, you would need to annually meet the requirements of the Registrar of Companies (which means spending money on audit and compliances). The bigger reason you would want to do this, of course, is because it releases the assets and investments made by you.
What it Includes?
- Public Accountant
A public accountant would be appointed by the court as a liquidator. The powers of the directors would devolve upon this person and he would be mainly responsible for accumulating all the assets of the company and paying off its debts. The excess would then be disseminated amongst the members.
- Documents Required
A statement of account has to be prepared, stating that there are no assets and liabilities except share capital and profit and loss debit balance. An affidavit and indemnity need to be executed by all directors. If there is any unsecured loan, a waiver letter should be submitted.
Procedure for Winding Up
Depending upon the type of industry, the following elements are central to the drafting of vendor agreements:
- Approximately 30 working days the statement of accounts must be submitted no more than a month before submission of the application. This is a declaration to the RoC that only what is submitted is to be considered and that the company has no other assets or liabilities.
- Approximately 25 working days Within a month of the submission of the statement of accounts, the application must be submitted along with the documents mentioned above.
- Approximately 3 months It takes at least two to three months to complete the closure of your company, but it could take much longer, depending on the findings of the liquidator appointed.
Frequently Asked Questions
A private limited company is a company or an entity which limits the liability of the owner to their respective shares.
Any private limited company restricts the number of shareholders to 50.
The term winding up is defined as the process by which a company ends up all of its business by selling all the assets of the company, paying off to all the distributors of the company thus dissolving its business.
There is a thin line of difference between the winding up and liquidation of a company. Winding up is the process of shutting down all the business affairs of the company, whereas liquidation is defined as the process of selling all the assets of the company.
In case if a company is liquidated due to bankruptcy, the liquidator may sell all of its assets in order to repay all the debts and liabilities.
In order to form a private limited company, a minimum of 2 directors which may exceed up to 15 are required.
A winding up of a company can be executed either by the process of compulsory winding up or by the process of voluntarily winding up.
Yes, a compulsory winding up of a company can be executed either by order of the tribunal or by the court. Further, the same can be done by passing a special resolution in a company’s board meeting.
No, legal actions cannot be taken either by the court or by the tribunal against the directors of the company in case of voluntary winding up of the company.
Yes, it is deemed to be necessary to appoint an official liquidator or an insolvency professional for the process of winding up of a company.
Yes, a No Objection Certificate (NOC) must be obtained from the Income Tax department for the process of winding up.
A period of 12 months is required for the completion of the process of winding up. This time period starts as soon as the initiation of the liquidation process begins.
No, directors of the company cannot be held personally liable for the debts of a company. Thus, in case if any company fails in paying off its debts, only the company’s assets are put to risk and not the personal belongings of a director.
Form INC 28 along with the ROC is required to be filled by the company for the submission of dissolution order.