The Companies (Winding Up) Rules, 2020

This blog is inscribed by Nandini Tripathy.

The Companies (Winding-Up) Rules 2020 shall come into impact from the 1st April 2020. The Ministry of Corporate Affairs (MCA) has notified the brand-new regulations regarding the winding up of organisations and these policies applicable underneath Companies Act 2013. The new rules will reduce the weight of the National Company Law Tribunals (NCLTs) by means of allowing precise tactics for liquidation. Petitions for finishing up agencies are situation to numerous situations, which includes thresholds on turnover and paid-up capital.

Key functions of the finishing up of the business enterprise beneath the guidelines of 2020, MCA has provided the policies for the completing for small business without going to the tribunal underneath the Companies Act 2013. For the purpose of Clause (ii) of sub-section (1) of Phase 361, the magnificence of small enterprise encompasses:

  • An employer which has taken a deposit and general tremendous deposits aren’t extra than 25 Lakhs.
  • An enterprise which has the full notable loan, inclusive of secured loan is not extra than 50 Lakhs.
  • An organisation which has turnover is up to 50 Crores.
  • An organization which has paid-up capital is up to at least one Crore.
  • A company which has paid-up capital is up to Rs.1 Crore.

Companies (Winding-Up) Rules – The Ministry of Corporate Affairs has notified rules for winding up small businesses without having to go to a tribunal (NCLT), under a provision in the Companies Act that offers an alternative to the commonly used liquidation procedure under India’s bankruptcy code.

About the rules

  1. Further define provisions under the Companies Act:

The rules notified by the ministry further define provisions of section 361 of the Companies Act which allowed such an option for liquidating small firms with assets up to ₹1 crore.

As per the rules, those companies which have a total outstanding deposit of up to ₹25 lakh, or those with outstanding loan including secured loan up to ₹50 lakh, or entities with up to ₹50 crore sales or those with paid-up capital up to Rs1 crore are covered under this provision.

  1. Role of official liquidator:

The rules mandate that the closure of the company will be carried out by the official liquidator hired by the government, who will take charge of the assets and deal with the claims of the company. 

  • Probe in case of fraud: If the liquidator finds any fraud having been committed by shareholders, directors or other officials of the company, the government may order a probe. 
  • The rules say that the Central Government will issue directions to the liquidator in case of companies going for summary liquidation similar to what bankruptcy tribunals do in other cases.
  • Management of resources: The Companies (Winding-Up) Rules, 2020, prescribe how official liquidators have to manage the resources of the company that goes into liquidation under various provisions of the law and the manner of selling assets under the guidance of the bankruptcy tribunal.
  • Each sale shall be held by the liquidator, or by an agent approved by the tribunal and all sales shall be made by public auction or by inviting sealed tenders or by electronic bidding as directed by the tribunal.

The rule will, therefore, help in fast-tracking the winding-up process of small businesses by shifting the jurisdiction from tribunal to the central government, thus improving Ease of doing Business. This will also help in reducing the case burden from NCLT.

The Official Liquidator shall hold the Registers and books of debts within the way supplied in guidelines seventy-nine and eighty. The submitting and audit are achieved by way of the tribunal of Official Liquidator’s money owed, consistent with the manner laid down in policies ninety-one to ninety-nine will be followed with the modification and instructions issued by way of the Central Government. The Official Liquidator shall put off all the property inside the way laid down in policies one hundred sixty-five to 167 with the change and instructions issued by using the Central Government. The Official Liquidator beneath Section 349 shall deposit cash into the general public account within the Reserve Bank of India. Under Segment 363, the creditors of the corporation should prove their declaration beneath rules a hundred to 125, with the change and instructions by using the Central Government.

Note: In the absence of any guidelines concerning the winding-up court cases with the aid of the Official Liquidator, if so, the Central Government directs the policies to be observed with vital adjustments.

Part II- Procedure for Winding up by Tribunal

Rule 3-

Under phase 272 (1), a petition for winding up of an organization is made in Form WIN 1 or Form WIN 2. The petition must be verified by a testimony by way of all petitioners in Form WIN three.

Rule 4-

Under phase 272 (4), the declaration of affairs required to filed in Form WIN 4 with facts of remaining 30 days before the date of submitting the petition. It is duly validated by a sworn statement made in Form WIN five.

Rule 5-

The tribunal offers the organisation an opportunity of being heard whilst the filing of the petition for finishing up is made by means of a person. Afterwards offers a route to publish an advertisement and offer copies to the involved folks of polishing off.

Rule 6-

The petitioner has to provide the copies to every contributor of the company inside 24 hours and make payment of five rupees in step with the web page for the same.

Rule 7-

The observer of the petition has to be posted in the newspaper earlier than 14 days of the date constant for the listening to. The advertisement will be made in Form WIN 6.

Rule 8-

The permission with the aid of the tribunal is required for the withdrawal of the petition of winding up.

Rule 9-

The substitution of the petitioner within the case where he isn’t always entitled to offer the petition for winding up or if the petitioner fails to promote it the petition or consent to withdraw the petition or wherein Tribunal opines to replace the petitioner.

Rule 10-

When tribunal substitutes a petitioner in a winding-up petition then directs for the change within the petition. After within 7 days of the order of modification, two fresh copies require to be provided with an affidavit attached and now handled as a new petition for polishing off of the company.

Rule 11-

Any objections raised within the affidavit filed by way of the petitioner shall be filed inside 30 days from the date of the order and require making a price of 5 rupees according to the web page inside three working days.

Rule 12-

Affidavit in response has to be filed inside 7 days from the date of listening to in opposition to the affidavit in objection.


The winding by way of a business enterprise is finished through a precise technique where the assets are under one crore, and now the NCLT has no function to play. According to new Companies regulations for winding up, the primary authorities affords guidance and has the authority to deal with the polishing off the corporation.

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