When a company gets under a lot of debt and is struggling to pay back its loans, it ends up getting insolvent. And to solve this crisis, companies have no other option than to file a winding-up petition. A company can choose to do this on their own, or they can get an order to wind up from any body of law or from the board of directors of the company. By filing the winding up petitions, a company is starting the liquidation of its assets. This means that all the assets of the company are collected and sold to pay its debts.
The procedure of winding up a company is given under the article of association of the company in corporate law. Every company, whether it is a private or public limited company, has the right to file this petition, either voluntarily or compulsorily.
The steps to file for winding up are listed under the limited liability partnership act. This law dictates that while winding up, the assets of a company are sold, and the surplus left is shared by the partners of the company. Steps to wind up a company are as follows –
1. File A Winding Up Petition
The first step for winding up a company is the filing of a winding up petition. A winding-up petition can be filed by the registrar or the owner of the company. Furthermore, the petition can also be filed on behalf of the company by any trade creditor, government employee, or any member of the company. The winding petition should be in the form WIN 1 or 2.
This petition must be submitted in triplicate, and then a WIN 3 form must be submitted along with the affidavit in the petition.
- Wind-up petitions filed are discussed by the tribunal in a hearing.
- The petition is discussed and is accepted or rejected by the tribunal.
- If the claim is accepted by the tribunal, a liquidator is appointed to evaluate the assets and assist in the process of winding up.
- The liquidator who is appointed submits their report in front of the tribunal to make the final judgment.
- Tribunal gives out final guidelines according to which the process of winding up takes place.
The voluntary winding up of any company is done by the creditors or the members of the company. There is no intervention of the tribunals in this process.
- A resolution is passed for the commencement of liquidation.
- Liquidators are appointed, and their remuneration is decided.
- Liquidators must prepare the necessary reports for winding up.
- The official announcement is given by the liquidator.
- Within 14 days of passing the resolutions and reporting, the proposal is accepted or rejected.
- Within 60 days, the liquidator must complete the pending works and process.
- If the liquidator application is rejected, the court issues the order for the company accordingly.
A lot of people don’t know about the type of documents that they need to keep handy when filing a winding-up petition. Here is a list of documents that you need to have when filing a winding-up petition from jk cabinets
- Certificate of company’s incorporation
- Statement of affairs of the company
- Certificate for closure of company’s bank accounts
- Memorandum of association
- Articles of association of the company
- Advertisement in various fields
- Certificate of appointment of liquidator
- Copy of board resolution
- Winding up petition forms
So these were the things that we must know before we go through the dissolution of the company. Moreover, this entire procedure is completed under the company act of 2013. Any company goes through the winding up process after successive failures and losses. And therefore, to avoid winding up your company, hire an insolvency solicitor who can help you legally.