Ministry of Corporate Affairs (‘MCA’) has vide Notification dated January 24, 2020, notified the Companies (Winding-Up) Rules, 2020 in order to provide a systematic procedure of winding up of a Company under Cos Act. The Rules cover both types of Companies that have applied for winding up under section 271 as well as the companies opting for summary liquidation under section 361 of the Companies Act, 2013.
The aforesaid Rules comprise of 191 rules and 95 forms and shall be effective from April 01, 2020. Presently, winding up of a company can be dealt with under the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016 (‘IBC Code’) respectively under specific circumstances. For example, the voluntary winding up proceedings and winding up by Tribunal on the grounds of inability to pay debts to fall within the purview of the IBC Code.
On the other hand, the proceedings of winding up on the grounds (other than the inability to pay debts) are governed by the Companies Act, 2013 by following procedures mentioned under the National Company Law Tribunal Rules 2016. Apart from the above, there does not exist any specific rules pertaining to winding up under the Cos Act.
The recent notification allows the covered companies to initiate winding up of their businesses by making a winding-up application to Central Government (rather than having to apply before National Company Law Tribunal). Under the new rules, the Central Government will provide required approvals to companies for the normal winding-up process which is otherwise undertaken through the Tribunal, thereby reducing the burden on Tribunal and greatly shortening the overall timelines of winding-up procedure.
The Rules further provide that Companies having a book value of assets upto INR 1 Crore can also approach Central Government for liquidation. The recent Rules provide that the filing and audit of the Company Liquidator’s accounts and disposing of assets (Rule 165 to 167 of the Rules) shall be applicable to the above class of companies with the modification that the word ‘Tribunal’ shall be considered as ‘Central Government’.
Furthermore, the Rules provide the framework for a meeting of creditors and contributors of the Company, as also specifying the scenarios in which creditors can and cannot vote. The Rules further outline the procedure for creditors to provide proof of their debts and claims against the company. In case, the proof of such debt gets rejected by the Company Liquidator, there are provision and process for the creditors to make an appeal to Tribunal
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