Winding up and Liquidation of the Company in India


Upon the establishment of the Company, the directors of the Company play a vital role in dealing with the daily management of the Company. The Company has to carry-out various procedures on and after incorporation. At any point after the set up of the Company, if the directors are desirous close or wind up the Company, the Company is required to follow a certain procedure for the purpose of winding up. 

Under the Indian law, Winding up of the company is a process by which the Company is dissolved. The Company can either “Voluntary Wind up” or “Involuntary Wind up” under the special statute called as the “The Insolvency and Bankruptcy Code of 2016” (IBC). 

Involuntary winding up when the Company is unable to pay its debts gives rise to winding up of the Company. Voluntary winding up on the other hand is when the Company hold sufficient assets to cover its debts, but is however desirous of winding up its operation in order to distribute the assets among its stakeholders in a systematic manner.  


For the purpose of voluntary winding up of a company, the IBC lays down a procedure that the Company needs to follow. Certain pre-requisite such as the 3 major pre-conditions must be complied with in order to wind up. Firstly, there should be no default on debt repayments, the company must declare that it is solvent and is able to settle all its debts in full, from the proceeds of the sale of the assets during voluntary liquidation; and lastly the company should state that it is not being liquidated in order to defraud anyone. The directors of the company are required to file such a declaration of solvency affidavit within five weeks of filling the application for voluntary liquidation with the NCLT. Along with this document, the Company is also required to attach a list of all its debts, audited financial statements of the Company, details of business operations over the past two years, or less if the company was incorporated for only a short period of time, and an asset valuation report that has been completed by a registered valuer; if there are any assets held by the Company. 

The Directors shall thereafter call for a board meeting in order to approve voluntary winding up and appoint an Insolvency Professional (IP) that shall act as a liquidator to manage the process of liquidation. The board shall also call for an annual general meeting in order to pass a special resolution assenting the resolution passed in the board meeting. 

Upon the liquidators being appointed, he shall take control of the debts and assets of the Company.  The liquidator shall make a public announcement about the voluntary winding up of the company within 5 days of taking control of the company, inviting any claims that must be submitted within 30 of the liquidation process starting. The public announcement shall be submitted in the relevant newspaper and on the company’s website.

The liquidator shall compile all the claims and shall prepare a list of the stakeholders including the detail of the amount claimed extent of debt, proof of claim etc. This report shall be submitted as a preliminary report within 45 days of initiating the liquidation proceedings to the National Company Law Tribunal (NCLT). 

In the meanwhile, the liquidator shall also collects and liquidates the company's assets and the proceeds received shall be distributed to the debtors , including operational and financial creditors. Any surplus remaining shall be distributed among the shareholders. 

In the end, after completing all necessary formalities and distributing the assets, the liquidator files a final report with the NCLT, along with an application for dissolution. Upon satisfaction, the NCLT shall issues an order dissolving the company.


Voluntary winding up is one of the most efficient ways of winding up when shareholders choose to exit the company. It is a pragmatic solution to wrap up the affairs of the company in a transparent and efficient manner. IBC has laid down a structure framework through which the company can gracefully wind up its affairs, protecting the rights of the shareholders, investors and creditors.   The main objective of voluntary liquidation is to ensure that the assets of the company are distributed fairly among its creditors and shareholders, while also promoting a swift and efficient exit from the business. 


The above content is provided for informational purposes only. The provision of this article does not create an attorney-client relationship between D'Andrea & Partners and the reader and does not constitute legal advice. Legal advice must be tailored to the specific circumstances of each case, and the contents of this article are not a substitute for legal counsel.

Winding up and Liquidation of the Company in India(图1)Winding up and Liquidation of the Company in India(图2)

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