Amendment 2013 Act for Winding up

Companies Act, 2013, replaced several provisions of the Companies Act, 1956 and brought significant changes to the winding up process of companies in India. The aim was to streamline, speed up, and integrate the insolvency mechanism with evolving frameworks such as the Insolvency and Bankruptcy Code (IBC), 2016.

Definition of Winding Up

Winding up refers to the legal process of closing a company, selling its assets, paying off liabilities, and distributing the surplus (if any) among shareholders. It leads to the dissolution of the company.

Modes of Winding Up under Companies Act, 2013

Initially, the Act provided for three modes:

1. Compulsory Winding Up by Tribunal (NCLT)

2. Voluntary Winding Up

3. Winding Up under Supervision of Tribunal

However, after amendments & enactment of IBC, only the first mode is retained under Companies Act, 2013.

Amendments After IBC, 2016 Integration

The Insolvency and Bankruptcy Code, 2016 shifted the responsibility for corporate insolvency and voluntary liquidation from Companies Act to IBC.

Key Changes Post-IBC:

• Section 304 to 323 (Voluntary Winding Up) of Companies Act, 2013 were omitted.

• Voluntary liquidation is now governed under IBC Section 59.

• Only winding up by Tribunal is retained under Companies Act, 2013.

Grounds for Winding Up by Tribunal (Sec 271)

The Tribunal may wind up a company under the following grounds:

1. If the company has acted against the sovereignty or integrity of India.

2. If the company has made a default in filing financial statements or annual returns for 5 consecutive years.

3. If the Tribunal thinks it is just and equitable to wind up the company.

4. If the company is unable to pay its debts.

5. If the affairs of the company were conducted in a fraudulent manner.

6. If the company has defaulted in complying with Tribunal’s order under Companies Act.

Who Can File the Petition for Winding Up?

• The company itself

• Any creditor (secured/unsecured)

• The Registrar of Companies (with prior approval of the Central Government)

• Central or State Government

• Any contributory (past or present members)

Role of National Company Law Tribunal (NCLT)

NCLT is the primary adjudicating authority for winding up matters under the Companies Act, 2013. It:

• Admits or rejects winding up petitions.

• Appoints a Company Liquidator.

• Supervises the entire winding-up process.

• Issues the order of dissolution upon completion.

Procedure for Compulsory Winding Up

1. Filing of Petition: By eligible parties.

2. Admission by NCLT: If grounds are valid.

3. Appointment of Provisional Liquidator (if necessary).

4. Statement of Affairs by directors.

5. Winding Up Order by Tribunal.

6. Appointment of Company Liquidator.

7. Realisation of assets & settlement of liabilities.

8. Final report and application for dissolution.

9. Dissolution order by NCLT.

Liquidator’s Role (As per Sec 275–277)

• Takes charge of company assets.

• Settles claims of creditors.

• Distributes surplus (if any) among members.

• Submits reports to NCLT.

• Files final accounts and gets approval for dissolution.