What is Winding up of a Company?
Winding up is a process of bringing a company’s affairs to a close, liquidating its assets, and distributing the proceeds among its creditors and shareholders. A liquidator is appointed to take control of the company and realises the company’s assets, and applies the proceeds in payment of its debts.
Winding up can be voluntary or compulsory. The compulsory winding up process is done when the creditors, the ROC, or the company itself apply for winding up to the NCLT. On the other hand, voluntary winding up is initiated when the company applies to NCLT to initiate the winding up process after passing a special resolution.
Difference between Dissolution and Winding up of a Company
Dissolution of a company is a legal process where a company is dissolved by an order of a Tribunal; i.e., National Company Law Tribunal (NCLT), after the winding up process is completed. Dissolution brings a company’s existence to an end, and the name is struck off by the Registrar of Companies (ROC). Both Dissolution and Winding up are related to the company’s end and are mostly confused. The process of winding up is the one where the liquidator is appointed to settle and distribute the company’s assets among the creditors and other relevant stakeholders. Only when the winding-up process is completed does dissolution take place.
Table of Content
- What is Dissolution of a Company?
- What is Winding up of a Company?
- Difference between Dissolution and Winding up of a Company
- Conclusion
- Frequently Asked Questions (FAQs)