Winding up

The winding up or liquidation of a company is the process by which a company’s assets are collected and sold in order to pay its debts. Any monies remaining after all debts, expenses and costs have been paid off are distributed amongst the shareholders of the company. When the winding up has been completed, the company is formally dissolved and it ceases to exist.

Broadly speaking, a company can be wound up in one of two ways. First, the Court can compulsorily wind up a company. Secondly, the shareholders or the creditors of the company can themselves apply to wind up the company in proceedings known as “voluntary winding up”. 

The following is a brief overview of compulsory winding up.

The three modes of winding up are-

• Winding Up by the National Company Law Tribunal (the Tribunal)
• Voluntary Winding Up under section 59 of the Code;
• The ‘Fast Track Exit Scheme’ applicable to defunct companies under section 248 of the Act.