Dissolution of the LLP
If the Tribunal is satisfied that procedures have been followed in winding up of the LLP, then the Tribunal would pass an order that the LLP shall stand dissolved. The LLP Liquidator is required to file the copy of the order from the Tribunal with the Registrar for winding up of LLP. The Registrar on receiving the copy of the order passed by the Tribunal for winding up of LLP would publish a notice in the Official Gazette that the LLP stands dissolved.
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WINDING UP
MEANING OF WINDING UP:
Winding up is the process of closing down the legal existence of a company or LLP. During this process, the assets of the entity are realized, its liabilities are paid off and any surplus is distributed amongst the contributories. Once the adjudicating authority is convinced that these processes are completed, the entity is dissolved.
During winding up, the management of the company / LLP is in the hands of the liquidator and not the governing body / board of directors. However, the assets and liabilities still belong to the company until dissolution takes place. On dissolution, the entity loses its legal existence.
Section 270 of the Companies Act, 2013 regarding the Modes of winding up, has been deleted after the enforcement of this Code. It has been substituted by Winding up by Tribunal.
DIFFERENCE BETWEEN ‘WINDING UP’ AND ‘DISSOLUTION’:
Many times, the terms ‘winding up’ and ‘dissolution’ are used interchangeably. This is not correct. There are very important differences in these two terms which are given below:
(1) Winding up is the first stage of ending the legal existence of the entity. In this stage, the assets of the entity are realized, its liabilities paid off and surplus, if any, is distributed amongst the contributories. Whereas dissolution is the final stage after completion of winding up process and by act of law, the legal existence of the entity comes to an end.
(2) The winding up process is handled by a liquidator / insolvency professional. The dissolution can happen only by way of an order passed by the adjudicating authority.
(3) Creditors can prove their claims during winding up but not on dissolution since the entity no longer exists.
(4) Winding up need not result in dissolution in all cases. A company which is in winding up can be taken over / amalgamated by any other entity / company which will result in the company coming out of winding up process and being handed over to the shareholders. This is not possible in case of dissolution.
WINDING UP BY TRIBUNAL
Section 271 of the Companies Act 2013 provides grounds for winding up of the company by the Tribunal.
According to section 271, a company may be wound up by the Tribunal in following cases:
(a) If the company has, by special resolution, resolved that the company be wound up by the Tribunal;
(b) If the company has acted against the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality;
(c) If on an application made by the Registrar or any other person authorized by the Central Government by notification under this Act, the Tribunal is of the opinion that the affairs of the company have been conducted in a fraudulent manner or the company was formed for fraudulent and unlawful purpose or the persons concerned in the formation or management of its affairs have been guilty of fraud, misfeasance or misconduct in connection therewith and that it is proper that the company be wound up;
(d) If the company has made a default in filing with the Registrar its financial statements or annual returns for immediately preceding five consecutive financial years; or
(e) If the Tribunal is of the opinion that it is just and equitable that the company should be wound up.
For commencing proceedings under section 271, a petition is to be made to the Tribunal. According to section 272, this petition may be made by any of the following persons:
(a) The company;
(b) Any contributory or contributories;
(c) All or any of the persons specified in clauses (a) and (b);
(d) The Registrar;
(e) Any person authorised by the Central Government in that behalf; or
(f) In a case falling under clause (b) of section 271, by the Central Government or a State Government.
Any petition filed by the company shall be accompanied by a statement of affairs in prescribed form. A petition can be filed by the Registrar only with previous sanction of the Central Government which shall be accorded only after giving to the company a reasonable opportunity of being heard.
Any petition filed under this section, apart from that filed by the Registrar himself, shall be served on the Registrar and the Registrar shall submit his views to the Tribunal within 60 days of receipt of such petition.
On a petition filed under section 272, the Tribunal may pass any of the following orders within 90 days of presentation of the petition:
(a) Dismiss it, with or without costs;
(b) Make any interim order as it thinks fit;
(c) Appoint a provisional liquidator of the company till the making of a winding up order;
(d) Make an order for the winding up of the company with or without costs; or
(e) Any other order as it thinks fit.
The Tribunal shall give an opportunity of being heard to the company before appointment of a Provisional Liquidator.
The order for winding up of a company shall operate in favour of all the creditors and all contributories of the company as if it had been made out on the joint petition of creditors and contributories.
The liquidator is required to submit to the Tribunal, a report containing the following particulars, within sixty days from the order:
(a) the nature and details of the assets of the company including their location and value, stating separately the cash balance in hand and in the bank, if any, and the negotiable securities, if any, held by the company:
(b) valuation Report of the assets obtained from registered valuers
(c) amount of capital issued, subscribed and paid-up;
(d) the existing and contingent liabilities of the company including names, addresses and occupations of its creditors, stating separately the amount of secured and unsecured debts, and in the case of secured debts, particulars of the securities given, whether by the company or an officer thereof, their value and the dates on which they were given;
(e) the debts due to the company and the names, addresses and occupations of the persons from whom they are due and the amount likely to be realised on account thereof;
(f) guarantees, if any, extended by the company;
(g) list of contributories and dues, if any, payable by them and details of any unpaid call;
(h) details of trademarks and intellectual properties, if any, owned by the company;
(i) details of subsisting contracts, joint ventures and collaborations, if any;
(j) details of holding and subsidiary companies, if any;
(k) details of legal cases filed by or against the company; and
(l) any other information which the Tribunal may direct or the Company Liquidator may consider necessary to include.
When the affairs of a company have been completely wound up, the Company Liquidator shall make an application to the Tribunal for dissolution of such company.
The Tribunal shall on an application filed by the Company Liquidator or when the Tribunal is of the opinion that it is just and reasonable in the circumstances of the case that an order for the dissolution of the company should be made, make an order that the company be dissolved from the date of the order, and the company shall be dissolved accordingly.