Grounds for compulsory winding up of a company

Winding up refers to the last stage in the life of a company. It refers to a legal process through which a company is put to an end.

Methods of Winding Up

The Act envisages two kinds of winding up. They are the following:

1. Winding up by the National Company Law Tribunal or compulsory winding up.

2. Voluntary winding up. This may be:

  1. Members voluntary winding up, or
  2. Creditors voluntary winding up.

This article discusses about the winding up of company by National Company Law Tribunal or otherwise called Compulsory winding up.

Winding up by the National Company Law Tribunal

Winding up of a company under the order of the National Company Law Tribunal is also known as compulsory winding up.

Grounds for Compulsory Winding Up or Winding Up by the National Company Law Tribunal

Sec. 433 of the Act lays down the circumstances in which the National Company Law Tribunal can order for a winding up of the company. They are as follows:

1. Special Resolution of the Company: If the company by a special resolution, resolved that the company be wound up by the National Company Law Tribunal. However, the National Company Law Tribunal is not bound to order for a winding up simply because the company has so resolved.

2. Failure to hold Statutory Meeting: If the company fails to hold the Statutory Meeting and fails to file the Statutory Report, the Registrar can present a petition for an order of winding up.

The National Company Law Tribunal, instead of effecting a winding up order may direct that the company to deliver statutory report to held statutory meeting.

3. Failure to Commence Business: Failure to commence business means that the company has not commence its business operation within a year from the date of its incorporation or suspended the business for the entire year. Here also, the power of the National Company Law Tribunal is discretionary and will be exercised only when the company is not intending to continue its business operation.

4. Reduction in Membership: The National Company Law Tribunal may order for winding up of the company if the number of members is reduced to the Statutory minimum.