Winding up of a company refers to bringing an end to the company. A company may be wound up under two conditions:
1. Winding up by the court of law
2. Voluntary windup
Windup By The Court of Law
A company may be wound up by the court. A windup may be initiated by moving a petition submitted to the court for issuing windup orders.
A court may wind up a company under the following conditions.
1. If a company has passed a special resolution about its windup by the court.
2. If the default is made in the conduct of statutory meeting.
3. If the default is made in delivering the statutory report.
4. If the company fails to start its business in a year from the date of its registration.
5. If the number of members falls below seven in case of a public company and two in case of private company.
6. When the company fails to pay its debts.
Voluntary windup is possible (i) when the period for which it was established has expired. (ii) If the company through a special resolution decides to wind it up voluntarily.
Kinds of Voluntary Windup
Voluntary windup is of two types:
1. Members voluntary windup:
A company is wound up at the will of its members if a declaration of the company’s solvency is issued by its directors.
2. Creditors voluntary windup:
When the company fails to file a declaration about its solvency with the registrar it is presumed that the company has gone bankrupt. Under such circumstances the company is required to call a meeting of its creditors for passing a resolution for winding up.