The Companies Act: What Is Dissolution of a Company?

All activities, starting from the formation to liquidation of a company are governed by the Companies Act, 1956. The final stage of liquidation of a company is called dissolution. Dissolution or winding-up of a company is the process by which the existence of a company is brought to an end. A company that has been dissolved ceases to exist as a separate legal entity.

It is no more capable of holding any property or asset, and no lawsuit can be filed against it with the National Company Law Tribunal (NCLT). The assets and property of the company are redistributed among the members of the company and its liabilities are paid off.

The Companies Act: Grounds for Dissolution

The basic grounds on which the NCLT orders for dissolution of a company are:

• When the activities of a company completely comes to an end.
• When the NCLT feels that the liquidator cannot continue with the winding up activity for want of money and assets.
• Due to any other reason.

The NCLT shall order dissolution of a company only when it feels that it is fair and reasonable to pass such an order. The company is considered to be dissolved from the date on which the order is passed by the NCLT. The liquidator shall send a copy of the order to the Company Registrar within 30 days from the date on which the order is passed. The Registrar shall make a record of the dissolution in its books.

The Companies Act: Dissolution of a Company Declared Void

As per Section 559 of the Companies Act, 1956, dissolution of a company can be declared void by the NCLT within 2 years of the date of its dissolution. The NCLT shall do so on application from the liquidator or any other interested person. The person or the liquidator on whose application such an order is made shall file a copy of this order with the Company Registrar. This has to be done within 30 days after the order has been made so that the Registrar registers the order.