Difference between Winding up and Dissolution of Company
Difference between Winding up and Dissolution of Company
Winding up and Dissolution of a Company are two separate steps in the process of closing a company. Winding Up is a process led by a liquidator under the Tribunal of laws where he settles and distributes the assets of the company amongst its creditors and shareholders’ before the company is dissolved.
After the winding-up process is complete the National Company Law Tribunal may pass the order of dissolution of the company that is the company seizes to be in the state of existence and its name shall be struck off from the register of Companies and shall be published in the Official Gazette.
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Wind Up of Company
Winding Up is defined as the liquidation of the company in the Insolvency and Bankruptcy Code, 2016, and the type of Wind up of the company is as follows:
- Compulsory winding up of Company
- Compulsory winding up of a Company could be a compulsory winding up as enforced by the creditors of the company
- Voluntary winding up of Company
- Voluntary winding up of Company of private limited company procedure as brought in by the corporate person.
Wind up of a Company is a two-step process, first Insolvency Resolution Process takes place and then liquidation of the company occurs. While the winding of the company is taking place the corporate entity still exists however after dissolution, the existence of the corporate entity is put to an end.
A Winding Up petition can be submitted by the company itself, by its contributors, by a Registrar, or by the Central or State Government.
A company may still be running its business during the procedure for winding up of a company in India if it instills that it will be beneficial for the winding-up process however after dissolution the company seizes to exist anymore to run its business.
Dissolution of Company
The Dissolution of a company may take place in two ways.
First in which the company is transferred to another company under the scheme of reconstruction or amalgamation. In such a case, the transfer of the company will be dissolved by an order of the Tribunal without it being wound up.
In the second scenario, the company shall undergo a winding-up process where the assets of the company shall be realized and proceeds shall be used to pay its liabilities. Once the debts have been settled, the remaining amount, if any, shall be distributed amongst the stakeholders, and Tribunal shall pass the order of dissolution of the company and strike its name off the register of the Registrar of the Companies.
Process of Winding up and Dissolution of Company
The winding-up of a company is judged by the Tribunal and the procedure for winding up of a company in India is purely a judicial function. There is a liquidator who carries off and administers the winding-up process. After winding up, the dissolution process takes place.
The dissolution of a company is recorded by the registrar of companies. This is a purely administrative function and does not involve any role for the liquidator. Dissolution is a necessary step following the winding up of a company.
For a better understanding of the difference, refer to the following table:
|
Particulars |
Winding-up |
Dissolution |
| Meaning | Winding up means appointing a liquidator to sell off the assets of the company, divide the proceeds among creditors, and file to the NCLT for dissolution. | Dissolution means to dissolve the company completely. Any further operations cannot be done in the company name. |
| Process | Winding up is one of the methods through which the dissolution of a company is carried on. |
Dissolution is the end process/result of winding up and getting the name stuck off from the Register of Companies. |
| Existence of Company | The legal entity of the company continues and exists at the commencement and during the winding-up process. |
The dissolution of the company brings an end to its legal entity status. |
| Continuation of Business |
A company can be allowed to continue its business during the winding-up process if it is required for the beneficial winding up of the company. |
The company ceases to exist upon its dissolution. |
| Moderator | The liquidator carries out the process of winding up. | The NCLT passes the order of dissolution. |
| Activities Included | Filling of winding up resolution or petition, the appointment of the liquidator, receiving declarations, preparation of reports, disclosures to ROC, and filing for dissolution to the NCLT. | Filing of resolutions, declarations, and other required documents to the NCLT to pass dissolution order. |
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