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Winding Up of Company

Liquidation is the liquidation of company assets that are collected and sold to pay off debts incurred. When the company is liquidated, the first debt, expenses and costs are paid off and distributed among the shareholders.

Once the company is liquidated it is formally dissolved and the company ceases to exist.

Liquidation is the legal mechanism for winding up a company and stopping all activities that are carried out. The company ceases to exist after the company is liquidated and the assets are monitored so that the interest of the stakeholder is not hampered.

A Private Limited Company is an artificial juridical person and if the company fails to maintain these compliances, further incorporation of the company requires various compliances leading to fines and penalties or even disqualification from the directors. It is always better to wind up a company that has become inactive or where there are no transactions.

The shareholders of the company can initiate the winding up of the company at any time. All dues need to be settled if any secured or unsecured creditors or employees are on the rolls. It is necessary to close all the bank accounts of the company after paying the dues. The GST registration will also have to be surrendered in the event of the company winding up.

Once all the registrations are surrendered the winding up application petition can be filed with the Ministry of Corporate Affairs.

Types of Company windup

What are the different ways in which a person can wind up a company?

A company can be wound up in two different ways-

  • Voluntary winding up of a Company
  • Compulsory winding up of a company

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