UNIT 4
E Governance and Winding up Company
B2B POSTED ON SEPTEMBER 22, 2017
In the arena of advanced technology, e-government has distinct place and it facilitates to huge number of customers to perform their task speedily. because the Internet supported digital communities grow, they present the national governments with numerous challenges and opportunities.
E-Governance which also referred to as electronic governance is essentially the application of information and communications technology to the processes of state functioning so as to cause ‘Simple, Moral, Accountable, Responsive and Transparent’ governance (Governance for The Tenth Five Year Plan (2002-2007), planning commission, November, 2001).
E-governance involve the use of ICTs by government organizations for exchange of information with citizens, businesses or other government departments, faster and more efficient delivery of public services, improving internal efficiency, reducing costs / increasing revenue, re-structuring of administrative processes and improving quality of services.
Concept of e-Governance
-World Bank, on E-governance
5. A transparent smart e-Governance with seamless access, secure and authentic flow of information crossing the interdepartmental barrier and providing a fair and unbiased service to the citizen.
- Dr. APJ Abdul Kalam
Historical review and current position of e-governance
It has been documented that within the decade of nineties, there was major Global shifts towards increased deployment of IT by governments due to emergence of the world Wide Web. The technology also as e-governance enterprises have come a long way since then. With the upsurge in Internet and mobile connections, people are learning to utilize their new mode of access in various ways. they need started expecting more and more information and services online from governments and company organizations to advance their public, professional and personal lives.
Objectives of E-governance
The tactical objective of e-governance is to support and streamline governance for all parties like government, citizens and businesses through effective use of ICTs.
IMPORTANCE OF E-GOVERNANCE
BASIC UNDERSTANDING OF MCA PORTAL
MCA PORTAL
MCA SERVICES
1. Obtain Digital Signature Certificate
About Digital Signature Certificate (DSC)
The Information Technology Act, 2000 has provisions for use of Digital Signatures on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed electronically. This is secure and authentic way to submit a document electronically. As such, all filings done by the companies/LLPs under MCA21 e-Governance Programme are required to be filed using Digital Signatures by the person authorized to sign the documents.
Related Links and Artefacts
1 Legal Warning: You can use only the valid Digital Signatures issued to you. It is illegal to use Digital Signatures of anybody other than the one to whom it is issued.
2. Certification Agencies:
Certification Agencies are appointed by the office of the Controller of Certification Agencies (CCA) under the provisions of IT Act, 2000. There are a total of eight Certification Agencies authorized by the CCA to issue Digital Signature Certificates (DSCs). The details of these Certification Agencies are available on the portal of the Ministry Certifying Authorities External link image
3. Class of DSCs:
The Ministry of Corporate Affairs has stipulated a Class-II or above category signing certificate for e-Filings under MCA21. A person who already has the specified DSC for any other application can use the same for filings under MCA21 and is not required to obtain a fresh DSC.
4. Validity of Digital Signatures:
The DSCs are typically issued with one year validity and two year validity. These are renewable on expiry of the period of initial issue.
5. Costing/ Pricing of Digital Signatures:
It includes the cost of medium (a UBS token which is a one time cost), the cost of issuance of DSC and the renewal cost after the period of validity. The company representatives and professionals required to obtain DSCs are free to procure the same from any one of the approved Certification Agencies as per the MCA portal. The issuance costs in respect of each Agency vary and are market driven.
However, for the guidance of stakeholders, the Ministry has obtained the costs of issuance of DSCs at the consumer end from the Certification Agencies. The costs as intimated by them are as under:
6. Obtain Digital Signature Certificate
Step by Step Process for additional Attachments to form 23AC :
12. Select the second option and upload saved ‘Additional Attachment Sheet’.
13. After uploading of 1 ‘Additional Attachment Sheet’, system will again prompt for making a selection. If you have the second ‘Additional Attachment Sheet’ for uploading, select the second option again and upload an equivalent . Otherwise select the first option and upload Form 23ACA to finish the filing and proceed to ‘payment option’ screen.
14. If you have uploaded two ‘Additional Attachment Sheets’ system will prompt you to file Form 23ACA to complete the filing and proceed to ‘payment option’ screen.
How to do the Filing Companies can do e-Filing in three different ways:
1) The company representative can upload the e-Forms on the MCA portal through the ‘Annual Filing Corner’ link (after registering oneself as a user of the portal) at his convenience from his office/ home. this is often the most convenient way of e-Filing.
2) The company representative can prepare the e-Forms as per guidelines, get them digitally signed by the authorized signatory, copy them during a CD or a pen drive and visit the closest “Registrar’s Front Office” (RFO). RFO staff will assist in uploading of e-Forms on MCA portal. For addresses/ phone numbers of RFOs, please ask the “Facilitation Centre” link on the homepage of MCA portal.
3) The company representative also can contact any of the Certified Filing Centers (CFCs) for the Annual Filing of e-Forms by paying the service charges to the CFCs. the details about the CFCs are available under the ‘Certified Filing Centre’ tab on the homepage of MCA Portal.
DIN- DIRECTIONS IDENTIDICATION NUMBER
Director identification number is a prerequisite for appointment as director during a company in India. Same time Register of Directors and Key Managerial personnel serve the aim of Record of interests of those persons in company and otherwise.
Directors’ Identification Number (SECTIONS 153 – 159)
(Section 153)
Every individual intending to be appointed as director of a company shall make an application for allotment for Director Identification number (DIN) to the Central government.
(Section 154)
The Central government shall within one month from the receipt of the appliance allot a Director number to the applicant.
(Section 155)
No person who already has a Director Identification number shall apply for another Director Identification number.
(Section 156)
Every existing director, within one month of the receipt of Director Number from Central Government, shall intimate the number to all or any the companies where he/she may be a director.
(Section 157)
Every company, within fifteen days of the receipt of intimation from the director, shall furnish the Director Identification number to the registrar. If a company fail to furnish Director identification within a period specified under Section 403, the company shall be punishable with fine which shall not be but twenty-five thousand rupees but which can reach one lakh rupees and each officer of the company who is in default shall be punishable with fine which shall not be but twenty-five thousand rupees but which can reach one lakh rupees.
(Section 158)
Every person or company, while furnishing any return, information or particulars as are required to be furnished under this Act, shall mention the Director identification number in such return, information or particulars just in case such return, information or particulars relate to the director or contain any reference of any director. Where a replica of such resolution is to be furnished somewhere, DIN should be mentioned. Simply, this is often prudent to say DIN in all resolutions.
(Section 159)
If any individual or director of a company, contravenes any of the provisions of section 152, section 155 and section 156, such individual or director of the company shall be punishable with imprisonment for a term which can reach six months or with fine which may extend to fifty thousand rupees and where the contravention may be a continuing one, with an extra fine which may reach five hundred rupees for each day after the first during which the contravention continues.
The Ministry of Corporate Affairs has formulated the framework for Revival and Rehabilitation of Sick Companies under the companies Act. This framework intends to timely detect the sickness and take appropriate measures for revival of sick companies. during this article, we glance at the Revival and Rehabilitation of Sick Companies in detail.
Objectives
The objectives of the Revival and Rehabilitation of Sick Companies are listed below:
Determination of sickness of company
The company is assessed to be sick on demand by the creditors of a company representing 50% of the amount of debt under the following circumstances:
Overview of the process
• Once the company is decided to be a sick company, the application are often filed by the creditors to the tribunal within the prescribed format. The tribunal would make decisions within 60 days from the date of submission of application.
• Once the tribunal is satisfied thereon a company has turned a sick company, and it's within the state to repay its debts, within a specified time, then the order from the tribunal to the company is formed to repay its debts.
Act for the determination of the measures which will be adopted with reference to the revival and rehabilitation of the identified sick company either by a secured creditor of that company or by the company itself. the application thus made must be accompanied by audited financial statements of the company relating to the immediately preceding financial year, a draft scheme of revival and rehabilitation of the company, and with such other document as could also be prescribed.
Subsequent to the receipt of the application, for the purpose of revival and rehabilitation, the Tribunal, not later than seven would be required to repair a date for hearing and would be appointing an interim administrator under Section 256 of 2013 Act to convene a gathering of creditors of the company in accordance with the provisions of section 257 of the 2013 Act. In certain circumstances, the Tribunal may appoint an interim administrator as the company administrator to perform such functions as the Tribunal may direct.
• The administrator thus appointed would be required to prepare a report specifying the measures for revival and rehabilitation of the identified sick industry. The measures that are identified under the section 261 of the 2013 Act for the purpose of revival and rehabilitation of a sick company provides for the following options:
1. Financial reconstruction
2. Change in or takeover of the management
3. Amalgamation of the sick company with any other company, or another company’s amalgamation with the sick company
• The scheme thus prepared, will need to be approved by the secured and unsecured creditors representing three-fourth and one-fourth of the total representation in amounts outstanding respectively, before submission to the Tribunal for sanctioning the scheme pursuant to the need of section 262 of the 2013 Act. The Tribunal, after examining the scheme will give its approval with or with none modification. The scheme, thus approved will be communicated to the sick company and the company administrator, and in the case of amalgamation, also to the other company concerned.
• The sanction accorded by the Tribunal will be construed as conclusive evidence that all the requirements of the scheme relating to the reconstruction or amalgamation or the other measure specified therein are complied with. a copy of the sanctioned scheme will be filed with the ROC by the sick company within a period of 30 days from the date of its receipt.
• However, if the scheme isn't approved by the creditors, the company administrator shall submit a report to the Tribunal within 15 days, and the Tribunal shall order for the winding up of the sick company. On passing of an order, the Tribunal shall conduct the proceedings for winding up of the sick company in accordance with the provisions of Chapter XX,.
Application for revival and rehabilitation
Any companies determined as the sick company can make an application in the prescribed format to the tribunal so as to take necessary steps to be taken for its revival and rehabilitation and therefore the application has got to be accompanied by the following documents:
Note: the application has got to made to the tribunal within 60 days from the date of identification of the company as a sick company by the tribunal under the companies Act, 2013
Appointment of interim administrator
Upon submission of application, the tribunal would fix a date of hearing and appoint an interim administrator who should appoint a meeting with creditors of the company within 45 days and prepare a draft of the scheme for revival and present it before the tribunal within sixty days from the meeting.
In case of no draft, the scheme is provided, then the tribunal would assist the interim administrator in taking up the management of the business. the full assistance in coordinating the interim administrator would be provided by the Director or Management of the company.
Committee of creditors
The interim administrator will appoint a committee of creditors such number of creditors would not exceed seven, and these members should be present altogether the meetings, and therefore the interim administrator would direct all the directors, promoters, key managerial personnel of the company to attend the meeting and furnish the information whichever is required and necessary.
Order of tribunal
Scheme of revival and rehabilitation
A revival and rehabilitation of sick industries scheme are going to be prepared by the company administrator which includes measures like proper management of the sick company, financial reconstruction of the sick company, lease or sale of a part of any assets, amalgamation of the sick company with another company or another company with the sick company, takeover of the sick company by solvent company, rationalization of managerial personnel.
Sanction of the scheme
The scheme prepared by the management of the company should be placed before the creditors of the sick company during a meeting for his or her approval within the amount of 60 days. If the scheme is approved by the secured creditors then it might be examined by the tribunal and replica of the scheme draft with modifications made by the tribunal would be forwarded to the sick company for the suggestion. Then the tribunal would pass the order within 60 days sanctioning the scheme on receipt of the scheme.
Winding up of a company
If the revival and rehabilitation scheme isn't sanctioned by the secured creditors and the administrator has to present the report within 15 days stating the same, and the tribunal would order for the completing of the company.
Rehabilitation and insolvency fund
A fund which is known as the Rehabilitation and Insolvency Fund will be allocated for the needs of revival, rehabilitation, and liquidation of the sick companies.
Penalty
In case of providing a false statement or violating any order made the tribunal or the appellate tribunal would be punishable with imprisonment for a term of seven-year or more alongside a fine of Rs.1 lakh.
WINDING – UP MEANING
A private limited company is an artificial judicial person and requires various compliances like appointment of Auditor, regular filing of tax return, annual return filing and more. Failing to take care of compliance for a company could end in fines and/or disqualification of the directors from incorporating another Company. Therefore, if a private Ltd. has become inactive and there are not any transactions within the company, then it's best to finish up the company.
Voluntary winding up of a company are often initiated at any time by the shareholders of the company. just in case there are any secured or unsecured creditors or employees on-roll, the outstanding dues must be settled. Once all the dues are settled, the bank accounts of the company must be closed. Finally, the company must regularize any overdue compliance like tax return or annual filing and surrender the GST registration. Once, all activities are stopped and therefore the registrations are surrendered, the winding up application petition can be filed with the Ministry of Corporate Affairs.
India Filings can help you wind up your Company, quickly and simply. India Filings can assist you initiate the completing process within 10 to 14 business days. the whole process for winding up of a company are often completed within 3 to six months, subject to government processing times. The timeline for winding up of a company could also differ from case to case, based on unique circumstances. to discuss more about winding up a company, get in-tuned with an India Filings Advisor.
Winding up of a company by tribunal
Winding up of a company may be required due to a number of reasons including closure of business, loss, bankruptcy, passing away of promoters, etc., The procedure for winding up of a company are often initiated voluntarily by the shareholders or creditors or by a Tribunal.
As per Companies Act 2013, a company are often wound up by a Tribunal, if:
1. The company is unable to pay its debts.
2. The company has by special resolution resolved that the company be aroused by the Tribunal.
3. The company has acted against the interest of the sovereignty and integrity of India, the safety of the State, friendly relations with foreign states, public order, decency or morality.
4. The Tribunal has ordered the winding up of the company under Chapter XIX.
5. If the company has not filed financial statements or annual returns for the preceding five consecutive financial years.
6. If the Tribunal is of the opinion that it's just and equitable that be company should be wound up.
7. If the affairs of the company are conducted during a fraudulent manner or the company was formed for fraudulent and unlawful purposes or the persons concerned within the formation or management of its affairs are guilty of fraud, misfeasance or misconduct in connection therewith and it's proper that the company be wound up.
Compulsory winding up of a company
What is compulsory winding up?
In compulsory completing , a creditor asks the high court to wind up the affairs of an insolvent limited company. This legal process ends with the company's removal from the companies House register - effectively ceasing to exist.
Once the order has been made the high court appoints the Official Receiver (OR) as liquidator. The Official Receiver works for the Insolvency Service and finds out how and why a private became bankrupt or a corporation went into compulsory liquidation.
The OR interviews the directors and informs the creditors of the liquidation. If the OR believes the company has enough assets for something to be paid to its creditors the OR will seek the appointment of an insolvency practitioner as liquidator - either by calling a creditors' meeting for the creditors to vote for the liquidator or by asking the Department for the Economy (DfE) to appoint one. If there are no assets the OR will remain liquidator.
Compulsory winding up involves the following:
Sources of advice
If you are a creditor, it can be expensive to request a compulsory winding-up order, so you ought to get specialist legal and financial advice before petitioning the Court. Other sources of advice include:
You will need to instruct a solicitor to handle the winding-up petition. A winding-up petition is heard within the high court. The high court may award costs against you if it considers that you simply have brought the petition inappropriately - eg the company disputes the debt between you.
MEMBERS’ VOLUNTARY WINDING UP OF a company
The winding up of a company also can be done voluntarily by the members of the company, if:
1. If the company passes a special resolution for completing of the company.
2. the company generally meeting passes a resolution requiring the company to be wound up voluntarily as a results of the expiry of the amount of its duration, if any, fixed by its articles of association or on the occurrence of any event in respect of which the articles of association provide that the company should be dissolved.
STEPS FOR VOLUNTARY completing OF a company
The following are the steps for initiating a voluntary completing of a Company:
Members’ Voluntary winding up of a company
A members’ voluntary winding up is possible only the company is solvent and is able to pay its debts in full. in this case, it's not necessary for the members to consult the creditors or to call their meeting. A Declaration of Solvency should be made by the administrators .
Declaration of Solvency
The Declaration of Solvency is a crucial document within the members’ voluntary winding up. The declaration must be made within the meeting of the Board of Directors. It should be made by a majority of the directors and certified by an affidavit.
The declaration must be accompanied by a statement of assets and liabilities up to the date of declaration. a copy of the Auditor’s Report on the Profit and Loss Account and on the balance sheet from the last accounting date to a date ending with the latest practicable date immediately before the date of making the declaration also attached thereto .
The Declaration should be made and filed with the Registrar a minimum of 5 weeks immediately before the date on which it's proposed to pass the resolution relating to the winding up. Otherwise, the declaration won't be effective.
Procedure for A Members’ Voluntary winding up
The following procedure should be adopted just in case of Members’ Voluntary winding up.
1. Holding of the overall Meeting
After filing the Declaration of Solvency, the directors should plan to convene a meeting of the company and a resolution should be passed to this effect.
2. Appointment of Liquidators
A resolution should even be passed within the same meeting appointing one or more Liquidators. The members should also fix the remuneration of the Liquidator.
3. Notice to the Registrar
The company should give a notice of appointment of the Liquidator to the Registrar within 10 days from the date of appointment. The Liquidator should also inform the Registrar about his appointment within 30 days from the date of his appointment and should also publish the same within the Official Gazette.
4. Powers of the Board etc.
As soon as the Liquidator is appointed, all the powers of the Board of Directors or Managing Directors, or Whole Time Directors or Manager shall come to an end. However, the Liquidator or the members may allow them to continue for the beneficial winding up of the company.
5. Reconstruction in winding up
Generally, the Liquidator shall absorb charge of all the assets of the company, convert them into cash and pay the money first to the creditors then to the members, if any surplus is left. But sometimes, rather than selling the property of the company for cash, he may sell the assets of the company for shares in another company.
6. Holding of the overall Meeting at the end of the primary Year
Where the process of liquidation continues for quite one year, the Liquidator must involve a general meeting at the top of the primary year and also at the top of every subsequent years. He must submit before the meeting, an account of his acts and the progress of winding up during the year.
7. Final Meeting of the Members
As soon as the affairs of the company are fully wound up, the Liquidator should call for a meeting of the members by giving an advertisement in the Official Gazette and in some newspapers circulating within the district where the Registered Office is situated.
The notice must be given at least one month before the date of the meeting. It should specify the time, date and plan of the meeting. The Liquidator should submit before the meeting an account of the winding up showing
8. Notice to the Registrar and Official Liquidator
The Liquidator, within one week after the date of the meeting, should send a copy of the account along side a return of the meeting, to the Registrar of Companies and also to the Official Liquidator attached to the concerned high court.
9. Report of the Official Liquidator to the National Company Law Tribunal
On receipt of the account and therefore the return of the meeting, the Official Liquidator should make a scrutiny of the books and papers of the company; After scrutiny, the Official Liquidator should submit a report back to the National Company Law Tribunal.
a) If the report reveals that the affairs of the company weren't conducted during a manner prejudicial to the interests of the members or public, the company is deemed to be dissolved from the date of submission of the report.
b) If the report, on the opposite hand, contains any adverse remarks, the National Company Law Tribunal must direct the Official Liquidator to form further investigation into the affairs of the company.
c) On the receipt of the report of the Official Liquidator on such further investigation the National Company Law Tribunal may either make an order that the company shall stand dissolved with effect from the date to be specified by the National Company Law Tribunal therein or make such other order because the circumstances of the case brought call at the report permit.
10. Duty to call for the Creditors’ Meeting
If, within the opinion of the Liquidator, the company won't be ready to pay its debts fully , within the amount laid out in the Declaration of Solvency, the Liquidator should immediately involve a meeting of the creditors of the company. He should submit a statement of affairs of the corporate before the meeting.
Thereafter, the winding up shall cease to be a members’ voluntary winding up but will proceed in accordance with the provisions applicable to the creditors’ voluntary winding up.
11. Provisions on Annual and Final Meeting just in case of Insolvency
If within the case of a members’ voluntary winding up, the liquidator finds that the corporate is insolvent, Sections. 508 and 509 shall apply as if the winding up were a creditors’ voluntary completing and not a members’ voluntary winding up.
It should be noted that in such a case Sections. 508 and 509 shall apply to the exclusion of Sections. 496 and 497. Sec. 508 deals with the duty of the liquidator to call a meeting of the company and of creditors at the end of each year and Sec. 509 deals with the final meeting and dissolution just in case of creditors’ voluntary winding up.
REASONS TO WINDING UP OF A COMPANY
Avoid Compliance
A company may be a legal entity and a juristic person established created under the companies Act. Therefore, a corporation is required to take care of regular compliance throughout its lifecycle. winding up process are often to shut a corporation that's not active and avoid compliance responsibilities.
Fast to shut
A company also can be closed by filing an application with the MCA in about 3 to six months. the whole process are often completed online. Hence, the method for closing a company is fast and easy in India through India Filings.
Avoid Fines
A company that does not file its compliance on time incurs fines and penalty including debarment of the directors from starting another Company. Hence, it's better to officially finish up a company that's inactive and avoid potential fines or liabilities within the future.
Low Cost
When compared to maintaining compliance for a dormant company, it'd actually be cheaper to finish up a company and incorporate again when the time is true. India Filings can help you wind up a company starting from just Rs.29899 all inclusive fee.
Easy to close
A company with minimal or no activities that has maintained proper compliance are often closed very easily in India. If any compliance is overdue, the compliance must first be regularized and registrations surrendered to shut the company.
WHAT IS A CREDITORS’ VOLUNTARY WINDING UP?
Creditors are the people who the company owes money to for providing goods, services or loans to the company. Customers who haven't received goods they need already purchased and employees who have outstanding wages can also be considered creditors.
A creditors’ voluntary winding up is that the winding up of a company by a special resolution of the shareholders under the scrutiny of the company’s creditors. this happens when the company is insolvent. If the administrators of the company are unable to supply a declaration of solvency, the company can proceed with the creditors completing .
THE SITUATIONS WHERE A COMPANY CAN'T BE WINDING UP THROUGH A CREDITORS VOLUNTARY winding up ARE WHEN:
HOW TO PREVENT A CREDITORS VOLUNTARY winding up
As a company director, one among your fundamental duties is to make sure that your company doesn't trade while it's insolvent. one among the best ways to stop a creditors voluntary winding up is to avoid insolvency altogether. you'll do so by ensuring that the company has sufficient funds to pay company debts as and once they fall due.
If your company is insolvent, you ought to cease trading immediately and seek professional advice about getting into voluntary administration or appoint a liquidator yourself. Continuing to trade when your company is insolvent may result during a breach of your directors’ duties and private liability for the debts of the company.
Warning signs that your company could also be insolvent include when your company:
Differences between a Creditors Voluntary winding up and a Members Voluntary winding up
Solvency
The key difference between a creditors voluntary winding up and a members voluntary winding up is that the members voluntary winding up is merely an option if the company is solvent. Solvency may be a company’s ability to pay their debts as and once they fall due. If a company isn't solvent, it's insolvent.
Creditor Involvement
Another key difference is that a members voluntary winding up usually doesn't involve creditors. this is often because the company remains solvent and during a position to pay its creditors.
Process
The process for a creditors voluntary winding up is more complex than that for a members voluntary winding up. this is often generally because the appointed liquidator will need to conduct thorough investigations and analysis on the company’s assets and affairs when paying out creditors.
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