Compulsory Winding up of a Company



Before Insolvency & Bankruptcy Code, 2016, (IBC, 2016), winding up of companies was only dealt under the Companies Act, 2013. But now, Companies can be wound up under the provisions of either Companies Act, 2013 or Insolvency & Bankruptcy Code, 2016 according to the facts and circumstances of the case.

Provisions of Winding up of a Company –

Companies Act, 2013 Sections 230 & 231 and 270 to 365
Insolvency & Bankruptcy Code, 2016 Sections 33 to 54 and Section 59



What is Winding up of a Company?

Winding up of a company is a process whereby the company’s life is ended and company’s administrator sells all the assets of the company and then

distributes such proceeds among creditors and shareholders.

What are the modes of winding up of a Company?

Section 270

There are following two modes of winding up of company –

 What is Compulsory Winding up of a company?

When a company is legally bound and forced to wound up its affairs by the order of Court or National Company Law Tribunal (NCLT) then it is called as Compulsory Winding Up. 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.

What are the Grounds for Compulsory Winding up of a Company?

Ground for Compulsory Winding Up of a Company

Section 271 of the Companies Act, 2013, has prescribed the following circumstances under which a company can be wound up by the Tribunal –

  1. Company passes a special resolution to wind up the company by tribunal.
  2. Company acts against the sovereignty and integrity of India
  3. Company defaults in filing Annual Returns or Financial Statements for 5 Consecutive financial years.
  4. In the opinion of tribunal, Company conducts the affairs of company fraudulently.
  5. In the opinion of tribunal, Company was formed with the object of committing fraud or for any other unlawful purposes.
  6. The tribunal is of opinion that it is just and equitable to wind up the company.

What is the process of compulsory winding up of a company?

1. Petition –

First step is to file a petition by categorized persons before National Company Law Tribunal (NCLT) for winding up of company.

Such petition has to be accompanied by the statement of affairs of the Company.

Who can make application before Tribunal for Compulsory winding up of company?

Section 272

Any of the following persons can file a petition before Tribunal for winding up of company –

    • Company itself
    • Registrar of Companies
    • Contributories
    • Creditors
    • Any person who is authorized by either Central Government or State Government

In case of Registrar –

    • Registrar has to take prior consent of Central Government before filing petition for winding up and Central Government shall give reasonable opportunity of being heard before granting sanction to ROC.
    • After filing the petition, ROC has to obtain a copy of such petition and then has to file his reasons and views thereon before tribunal within 60 days from the date of receipt of petition.

2. Advertisement of Notice –

After the filing of petition, the petition has to be advertised in a following way-

    • Must be published under Form 6
    • Must also be published in one daily journal at least for 14 days
    • Must also be published in one English newspaper and in one regional newspaper of place of registered office.

3. Audited books of accounts –

It is mandatory for company to submit complete audited books of accounts before the tribunal. Thereafter, the tribunal will check the credibility of accounts and that whether the company has complied with all the mandatory compliances.

4. Reasonable opportunity of being heard –

The tribunal shall serve notice on the company regarding winding in order to give a reasonable opportunity of being heard. Such opportunity is given before the appointment of provisional liquidator.

5. 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. It shall be annexed with statement of affairs of company.

6. Time to pass order on winding up application

The tribunal has to pass an order on the petition for winding up within a period of 90 days from the date of receipt of such petition.

Accordingly, tribunal shall pass an order under Section 273.

What actions can the Tribunal take on receipt of Petition for winding up of the company?

Section 273-

The Tribunal is authorized to make any of the following order on receipt of application for winding up of company –

    • Dismissal of petition
    • Interim Order thereon
    • Appoint a provisional liquidator of the company to complete the process of liquidation
    • Order of winding up of the company
    • Any other which Tribunal thinks fit

7. Notice of dissolution –

When the company is dissolved, the registrar of companies shall issue a notice of dissolution of company in the official gazette.

Conclusion –

Compulsory Winding up of a company is indeed a tough task. We hope all of your doubts relating thereto are cleared and in case you are looking for a professionals’ team for undertaking the winding up task on your behalf then you are at the right platform.

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Knowledge Source:

Voluntary winding up of a Company

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