Winding up is the liquidation of Company’s assets which are collected and sold in order to pay the debts incurred. When the company winding up takes place firstly the debts, expenses and costs are paid away and distributed among the shareholders. Once the Company is liquidated it is formally dissolved and the Company ceases to exists.
Winding up is the legal mechanism to shut down a company and cease all the activities that are carried on. After the Company winding up the existence of the Company comes to an end and the assets are monitored so that the stakeholder’s interest is not hampered. A Private Limited Company is an artificial judicial person and requires various compliances if the company fails to maintain these compliances there are fines and penalties or even disqualification of the Directors from further incorporating a Company. It is always a better to wind up a company that has become inactive or where there are no transaction.
The shareholders of the Company can initiate the winding up of the company anytime. If there are secured or unsecured creditors or employees on roll then all the dues need to be settled. After settling the dues, it is necessary to close all the Company bank accounts. The GST registration must also be surrendered in case of Company wind up. Once all the registration are surrendered the winding up application petition can filed with the Ministry of corporate affairs.
