A company that is under a lot of debt and cannot repay it needs to file for winding up petitions to declare its inability to pay off debts. To file this petition, a company needs to get in touch with professionals who can guide them better in this process. However, if you are to file for this petition, then you need to have a better idea of it and what are the steps involved in filing this.
In simple words, winding-up petitions are a type of petitions that are required to file for the winding up of a company. Winding up is a series of legal procedures that a company files when it is going to end its operations. In winding up, all the assets and liabilities of a company are sold out, and all the outstanding debt on the company is also cleared. In legal terminology, winding-up petitions are defined as “ According to Clause (94-A) of Section 2 of the Companies Act, 2013., “Winding Up” means winding up under this act or liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable”.
The winding-up of a company is done under the supervision of a person appointed by the law called a liquidator. After all the debts of the company are cleared, all the remaining assets of the company are divided among the partners of the company in proportion to their investments in the company.
Section 271 lays out conditions when a company can file winding-up petitions to a tribunal. These conditions are as follows –
- The company’s core committee decides that they should wind up or they are under the direct order of any tribunal to wind up.
- When a company is not able to clear its debts, it should file a winding-up petition.
- A company that is officially designated as sick means that the company is unable to conduct its operation, and this situation does not seem to get resolved in the future.
- Some of the past actions of the company have harmed the sovereignty and integrity and compromised the security of India.
- A company should file a winding-up petition when it is accused of conducting its operations in a fraudulent manner and has also filed default documents to the registrar.
Generally, a company decides to go for winding up when it is close to bankruptcy and insolvency. In this condition, the board of directors of the company decides to file a winding-up petition.
As defined under section 272 of the Indian Company Act of 2013, the winding-up petition can be filed by any of the following –
- The company that is willing to wind up
- Anyone who is a stakeholder in the company.
- A creditor of the company.
- Any central government employee who has been investigating the company.
- The registrar who has been handling the finances of the company.
Moreover, while filing this petition, the person filing the petition should mention all the grounds on which the winding petition has been filed. Only if the relevant data is provided along with the petition, then only a company is allowed by the tribunal to wind up. In addition to it, the personal details of all the witnesses should be included in the winding-up petition for the court to verify the witnesses.
Once the petition is filed, it is upto the tribunal to keep it or dismiss it at the first hearing. If the petition is accepted, the creditors of the company are given 21 days to respond with the relevant financial statements. Along with creditors, a company needs to have a team of professional lawyers who can help you with the process. So if you are filing this petition, hire a professional lawyer today.