Company Liquidation in India
Updated on Tuesday 21st November 2017
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The company liquidation in India refers to the process through which companies registered here are shut down due to various reasons. Investors may liquidate a company as a consequence of various economic problems and debts. The liquidation procedure is given by the Insolvency and Bankruptcy Code, which can be detailed by our team of consultants in company formation in India.
What does liquidation mean?
When starting a company in India, investors should take into consideration that some of the newly formed businesses may enter the liquidation procedure, due to a set of factors (faulty management, economic issues, low demand and others). According to the Indian legislation, the liquidation procedure refers to the manner in which the company’s assets are terminated and distributed to the entitled parties.
The liquidation can be started on a voluntarily basis through the intervention of the company’s creditors or other members. If this case will apply, the procedure can be completed without the intervention of a local court.
Voluntary liquidation in India
Liquidation is necessary when the company has to pay a large amount of debts to various parties. Through the voluntary liquidation, the directors of a solvent company will sign a formal declaration of solvency. The directors will need to appoint a general board meeting in which the decision of winding up will be established (it can be completed if two thirds of the members are in favor of this proposal).
Then, the company’s representatives will need to appoint a liquidator, who can handle the legal procedure and to notify the Registrar of Companies on the company’s current situation (in a period of maximum 10 days since the resolution was signed). Our team of agents in company formation in India can offer further information on the legal aspects related to the voluntary liquidation.
Types of liquidation procedures in India
The voluntary liquidation in India can be started by the following parties:
However, another type of liquidation can apply against the wish of the company’s directors, if the respective legal entity can no longer pay its financial obligations. The compulsory liquidation is a procedure which falls under the supervision of the local courts and our team of specialists in company registration in India can assist with more details.