Things to know before initiating Winding up of a company

When over 3L directors faced directorship suspension (which means they cannot be directors in any company for 5 years), entrepreneurs or directors who were lucky enough to have not brought under that radar, are now taking some serious decisions on filings and existence. In this blog, with an attempt help those directors who are considering winding up, we will look into things one must keep in mind in order to windup a Company.

Any company (Private Limited Company or One Person Company) continues to be in existence until it is dissolved according to the law.

#1. Dissolution can be done in following ways:
  1. By Removal of the company’s name from the register by the registrar without winding up order.
  2. By order of the Court
  3. By order of the central government.
  4. By winding up


#2. Dissolution and winding up are two different things:
  • Winding up procedure requires that liquidators acts of realizing and collecting the assets of the company, satisfying its debts and obligations, distributing its capital and surplus assets among the members of the company.
  • Dissolution comes after the liquidators have done all this in the winding up and tag the company as non-active.


#3. Winding can be done in following ways:
  1. Compulsory winding ordered by a court.
  2. Voluntary winding
  3. Subject to the supervision of the court


#4. While clearing out debts, assets from the members will be accounted in the following ways:
  • Every person liable to contribute to the assets of a company in the event of its being wound up, and includes holders of shares.
  • Past members will not be required to contribute in the following circumstance:
    • If he had ceased to be a member for a period of one year or more before the commencement of winding up
    • If the debt or liability of the company was contracted or incurred after he ceased to be a member
    • If the present members are able to satisfy the contributors required to be made by them under the Act.
  • In a company limited by shares, any past or present member is not required to contribute in excess of the amount, if any, unpaid on the shares in respect of which he is liable as such member.
  • In a company limited by guarantee, a past or present member is not required to contribute an amount which is in excess of the amount undertaken to be contributed by him to the assets of the company in the event of its being wound up.

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