What is Winding Up Agreement?

As per Section 2(94A) of the Companies Act, 2013, “winding up” means winding up under this Act or liquidation under the Insolvency and Bankruptcy Code, 2016. ‘Winding up’ of a Company is a legal mechanism of closing down or finishing up of a Company under the surveillance of a liquidator. Under this process, the corporate existence of a company comes to an end i.e. the company ceases to carry on its business. The directors are removed from control management of its affairs. Instead, an administrator called liquidator is appointed who takes the control of the company in his hands.

Why is it important to have it?

At the time of winding up the liquidator is appointed as said above to realize its assets and pays off its debts from the money so realized and finally distributes the excess between the members according to their rights pre-determined. So that at the end of the winding up process, the company will have no assets and liabilities and therefore it will take a formal step for its dissolution.

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