When a company is required by law to wind up its operations, this is referred to as compulsory winding up or winding up by a Tribunal. The Tribunal refers to the National Company Law Tribunal in this context. This can be decided in a court of law or in the form of a court order.

In the above instance, the company is compelled to appoint a liquidator. The liquidator will be in charge of managing the sales of the company and all of its assets, as well as distributing all assets following the liquidation among all creditors.

According to Section 271 of the Companies Act, a Tribunal has complete authority to make a winding-up order, but only in the following conditions. The circumstances are as follows:

1: Bypassing of special resolution for winding up;

2: Inability to pay debts;

3: Deadlock in management;

4: Sick Company;

5: Acts against the State;

6: Fraudulent Conduct of Business;

7: In case the company fails to file financial statements with the Registrar;

8: If it seems just, reasonable and equitable to wind up.

The voluntary winding up of a company is the second way to achieve closure. The procedure is often started by the company’s partners or shareholders, who do this by passing a special resolution. When the shareholders believe that the company will become bankrupt and unable to pay its debts, they decide to wind it up voluntarily. By disposing off its assets and paying off any remaining debts, the winding up procedure puts an end to the corporation’s existence.

The main objective of the wind-up is to make a profit from the company, which has neither a promising future nor a remaining mission. The court does not require this kind of winding up or liquidation. It is only authorized by the company’s board of directors and shareholders, even under unfavorable market conditions where stakeholders believe the business is having difficulties as a result. They can then enact a resolution to dissolve the business.

The process for a company’s board of directors to voluntarily wind it up is as follows:

• A resolution regarding winding up must first be passed by the company’s general meeting;
• The company’s solvency for all outstanding debts must be declared;
• An audit report on the company’s financial statements must be prepared by the auditor;
• The auditor’s report and the declaration of solvency must be submitted to the Registrar of Companies (ROC).
• The company must designate a liquidator for the winding up process; and
• The winding up process begins on the date that the resolution was passed.
• The company must then pass the resolution by a majority.
• The liquidator then prepares the report and calls a general meeting to declare the company’s final accounts prior to the wind-up process;
• The board of directors then passes the resolution;
• The liquidator then sends a copy of the report to the Tribunal and a copy of the statements to the ROC;
• The Tribunal then reviews the report and issues an order to conclude the winding-up process;
• Within thirty (30) days of the Tribunal’s order being passed, the liquidator is required to send a copy of the order to ROC. The liquidator will be subject to sanctions if they fail to comply with this.
• If the ROC is satisfied, it authorizes the company’s winding up and, in the end, removes the applicant company’s name from the Registrar of Companies.
• Subsequently, ROC notifies the Indian Official Gazette to publish the notification.

Fast Track Exit, or FTE, is a scheme that was introduced by the Ministry of Corporate Affairs, or MCA, by a notification dated December 26, 2016. As the name implies, companies can remove their names from the Registrar of firms (ROC) by using this scheme. This initiative was introduced with the intention of giving all the closed companies a chance to get their names taken off of ROC.