A company can be compulsorily wound up, or dissolved, by a court order if certain grounds exist. This means that the company's assets will be sold, and the proceeds will be used to pay off its debts and any remaining funds will be distributed to the shareholders. There are several grounds that can justify a compulsory winding up, including:
Insolvency: If a company is unable to pay its debts as they become due, it is considered insolvent. This is often the most common reason for a company to be wound up compulsorily.
Mismanagement: If the company's directors are not managing the company properly, or are acting in a way that is detrimental to the company's interests, the court may order a compulsory winding up.
Fraud: If the company's directors have engaged in fraudulent activities, such as embezzlement or deception, the court may order a compulsory winding up.
Deadlock: If the company's shareholders are unable to make important decisions because they are deadlocked, the court may order a compulsory winding up to resolve the issue.
Just and Equitable: If it is just and equitable for the company to be wound up, the court may order a compulsory winding up. This is a broad category that can include a variety of situations, such as a company that has become stagnant and is no longer carrying on its business effectively.
Compulsory winding up can be a complex and difficult process, and it is important for a company to seek legal advice if it is facing this possibility. However, in some cases, a compulsory winding up may be the best solution for a company that is struggling financially or facing other issues.
Compulsory Liquidation of a Company
Conclusion The above discussion reveals that the act of winding up a company is not just a mere wish and deliberate conduct by either member of the company or its creditors. When the business of a company is completely dissolved, the company is dissolved. The company shall be dissolved two years after the filing of the "Certificate of Release of Liquidator". However, the National Company Law Tribunal is not bound to order for a winding up simply because the company has so resolved. In case where there is default in payment: The voluntary winding up may also result when the company is in default of payments of debt amounting to one lakh or more but not more than one crore as prescribed by the CG. If you believe a creditor is about to take winding up action do not delay or attempt to manage the problem yourself.
What is Compulsory Winding up?
A shareholder may only apply for the liquidation of the company if such shareholder has been registered as such for a period exceeding six months immediately prior to the date of application or if the shares devolved upon such shareholder by virtue of the death of a former holder of shares. The paper must be circulated in the state or the Union territory where the company has the registered office. Statement of objections and claims The tribunal shall give a 30 days period from the date of receipt of application to every stakeholder to file the statement of objections against such winding up petition. A judgment might mean that shareholders use the money received from distributed assets when the corporation closed down to satisfy judgments against the corporation. What are the Grounds for Compulsory Winding up of a Company? Winding up subject to supervision of the court.
Grounds for compulsory winding up of a company
Order custom essay Winding Up of a Company with free plagiarism report It is greatly affected by the circumstances and facts of the case. Prior to such notification, the concept was governed under the ambit of the Companies Act, 1956 with respect to voluntarily winding up by the members or the creditors of the company which now have been repealed. A limited company is a company that is registered under the Companies Ordinance. However, the he can be removed, if he engages in any misconduct, fraud or any professional incompetence. Voluntary winding up Voluntary winding up is a method where the members or creditors of the company winds up the company.
Winding Up of A Company And Its Consequences
A business may need to be closed for many reasons that may be due to business failure or any other unavoidable circumstances. Gauri Sharma is a law student pursuing B. A sole proprietor is solely and personally responsible for the liability of the business. Further, where the company business has ceased for a period of one year, it is a good ground for its winding up. Similarly, any pending suits cannot be activated except with the leave of the Tribunal.
The Various Grounds Of Winding
Do so and they risk being accused of wrongful trading. The basic difference between them was that the former concept included a declaration of solvency made by the directors while in the latter the declaration was made by the directors and the creditors having dominant control in it. Before the expiration of 14 days following the last day on which the meeting should have been convened, the Registrar or a contributing may file a petition on this reason. Any findings will be submitted to the Insolvency Service. However, this method of winding up is not preferable as it is comparatively more time-consuming and costly than voluntary winding up.
Compulsory Winding up of a Company
The registered office is Langley House, Park Road, London N2 8EY. An overview of winding-up procedures:You can get a general picture on the winding-up procedures except "voluntary Winding up from the following steps: Firstly, issuing a written demand for debt repayment to the target company Secondly, presenting a winding-up petition to the Court and the company. In such cases, the tribunal orders the company to appoint an official liquidator to complete the process of winding up and dissolution of the company. Such order discharges the employees and officers from their duties and acts in the favor of all contributories. It is doubtful that it will be resurrected, so the court will allow it to wind up. Sixthly, appointment of liquidator.
GROUNDS FOR LIQUIDATION OF A COMPANY
If the company has hired employees for a specific period of time, and the term has not expired when the order of winding up is passed, the company cannot discharge such employee. Pass an interim order as it thinks fit c. Furthermore, as long as no money is taken out of the company and no shares are disposed of during its dormancy, there will be no dividend, income or capital gains taxes to pay. If the company goes into liquidation, the court of law appoints a liquidator for the liquidation. Once 3 months has passed after the lodging of the return, the company will be dissolved. The Tribunal where the registered office of the company is situated has the original jurisdiction section 280 of the Act over the petition and it has to take in to consideration that the process is not opposed to public interest or the interest if the company as a separate legal entity. This is also known as compulsory winding up.
5 Grounds For Winding Up Of A Company (guide + Examples)
What is a Just and Equitable Winding up Petition? However, it can reach the court to follow any direction. Therefore, it should be reasonable as per the provisions of the law. If a company is operating for an unlawful purpose or carrying out unlawful commerce then it makes a valid ground for compulsory winding up of the company. A LLB from Symbiosis Law School, Hyderabad and a corporate law enthusiast. HMRC are responsible for around 60% of The process of being compulsorily wound up is generally the worst option for an insolvent business. The affidavit of concurrence must be in Form WIN 5.