Voluntary Liquidation of Company: Conditions and Process of Winding Up a Company

Incorporating a company is quite a long process as compared to proprietorship, partnership or LLP. However, when the purpose of the company is fulfilled or the owners of the company no longer want to continue the business, they need to liquidate the company legally. There are two aspects in relation to voluntary liquidation of company – compulsory liquidation and voluntary company liquidation, the latter being applicable in the above case. Let’s dig into the intricacies of winding up a company and find out how you can liquidate your company voluntarily.

Meaning of Voluntary Liquidation of Company

Voluntary liquidation of company refers to the dissolution of the company voluntarily after obtaining the approval of the creditors and shareholders of the company. The procedure for voluntary company liquidation of the company is well defined under the Company Insolvency and Bankruptcy Code, 2016.

The entire process should be completed within 270 days from the date of commencement of the voluntary liquidation process where creditors are present. In case the company does not have any creditors, then the entire process should be completed within 90 days from the date of its commencement.

Conditions for Winding up a Company

Following are some of the conditions for voluntary winding up a company:

• Declaration from the majority of the directors should be obtained, verified by an affidavit that:
• They have made a full inquiry into the affairs of the company and have formed an opinion that the company has no debt or will be able to pay its debt in full from the proceeds of the assets of the company to be sold during voluntary liquidation.
• The company is not being liquidated to defraud any person.

• The above declaration should be accompanied with the following documents:
• Audited financial statements and a record of business operations of the company of the previous 2 years or from the date of incorporation, whichever is later.
• A valuation report of the assets of the company prepared by a registered valuer, if any.

• Within 4 weeks of the above declaration, the company should complete with the following processes:
• A special resolution passed by the members of the company in the general meeting requiring the company to be liquidated. It shall also specify appointing an insolvency professional who should act as the liquidator or,
• A resolution passed by the members of the company in the general meeting requiring the company to be liquidated voluntarily due to the expiry of its duration fixed by its articles if any or on the occurrence of any event in relation to which the articles provide that the company should be dissolved and appointing an insolvency professional to act as the liquidator.

Once the above conditions are satisfied, the company should carry on the liquidation proceedings by adhering to the liquidation process under the Insolvency and Bankruptcy Code, 2016. The National Company Law Tribunal will pass the order dissolving the company as on the date of the order.

Preservation of Records of the Company

After the company is liquidated, all the operations of the company come to a halt and the legal existence of the company is over. However, the Companies Act, 2013 requires the companies to preserve the records of the company at least for a period of 8 years. The same is applicable to the company that is voluntarily liquidated. Therefore, such liquidated company should also preserve the records of the company at least for a period of 8 years after dissolution of the company.

For more information about the Voluntary liquidation of the company, feel free to contact the ASC Group.

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