Compulsory winding up of a company


Status as on- 17/01/2022


It is better to abandon a sinking and damaged ship than to sink with it. A business may need to be closed for many reasons that may be due to business failure or any other unavoidable circumstances.

When a business decides to wind up, it can choose between a voluntary winding up method and a compulsory winding up procedure. In the year 2020, the Ministry of Corporate Affairs will issue notices on the winding up of small businesses.

Meaning of Winding Up

The process of bringing a company’s life to a close and administering its assets for the benefit of its members and creditors is known as winding up. Professor Gower defines winding up as “the process by which a company’s life is ended and its property is controlled for the benefit of its members and creditors.” An administrator, sometimes known as a liquidator, is appointed to take control of the company, collect its assets, pay its obligations, and eventually divide any excess among the members according to their entitlements.”

Winding up by Tribunal

When external members are involved in the winding up process, it is known as winding up by a creditor. A tribunal can convert a creditor’s voluntary winding up into a winding up u/s 270 and 271 of the Companies Act, 2013.

Grounds for compulsory winding up-

  • If the company has decided to be wound up by the Tribunal through a Special Resolution.
  • If the statutory report is not delivered to the Registrar or the statutory meeting is not held. Before the expiration of 14 days following the last day on which the meeting should have been convened, the Registrar or a contributing may file a petition on this reason. Instead of winding up, the Tribunal may mandate the holding of a statutory meeting or the delivery of a statutory report.
  • If the company does not begin operations within one year of its incorporation or suspends operations for a year. Only if there is no other option is it instructed to wind up on this ground.
  • If the number of members falls below the legal minimum, which in the case of a public company is seven and in the case of a private business is two.
  • If the business is unable to pay its bills.
  • If the tribunal determines that it is just and equitable to dissolve the corporation.
  • The Tribunal has the authority to investigate the revival and rehabilitation of sick units. If it is unlikely to be revived, the tribunal can order it to be wound up.
  • If the company has failed to file its balance sheet, profit and loss account, or annual return with the Registrar for five consecutive financial years.
  • If the corporation has violated India’s sovereignty and integrity, the state’s security, friendly ties with foreign countries, public order, decency, or morality.


The strategy for winding up isn’t excessively straightforward but it is an exceptionally extensive and time taking interaction. It incorporates inside its ambit numerous intricacies and details. The Ministry of Corporate Affairs through revisions made the course of arrangement of organizations simple and quick through its online stage.

Disclaimer- The above article is based on the personal interpretation of the related orders and laws. The readers are expected to take expert opinion before relying upon the article. For more information, please contact us at


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