you can file petition for voluntary winding up since there is deadlock between directors
Winding up a company because of deadlock
Myself and my wife are the only two directors with 50% shares each. It is a software products company. My wife has no business or technical role in the company. There is a deadlock in the company as we are undergoing a divorce also. My wife has filed a petition in NCLT bengaluru asking for appointment of an administrator. I am opposed to the idea of working under an administrator. I would like to actually wind up the company, split the financial assets (there are no liabilities), give a copy of our company's software asset to each of us with full grant of privilege to do anythting with it. Both directors shall have the freedom to start their own new company if they wish. To the existing customers and employees, give option to them either align with my company or the wife's company. What are the challenges achieving the above objective and what is the easiest and shortest possible way to achieve the objective?
Asked 3 months ago in Business Law
11 Answers
Prepare an agreement containing terms of the split and assets sharing. She will resign and convert the company into one man company.
By the way, i have proposed this plan to my wife and she is opposing my plan for winding up of the company. She wants me to continue to run the company so that she can continue to enjoy the profits and the increasing valuation of the company. I don't want to give such benefits to a person who is so unimaginably hostile towards me and has absolutely no contribution to the company.
Asked 3 months ago
She has apply to NCLT for appointment of administrator, you file cross claim to convert into One Man Company.
in alternative sell the company with mutual consent of your wife and split the sale proceeds
1. It is not easy to sell the company; the directors may not agree to the valuation, etc. 2. I actually want to run the company for couple of more years and then sell. 3. Most important thing for me is to have my independant operation (same company or a new company). Would like to form a new company making sure that my wife will not file any further cases against for stealing the business, software, customers, or employees.
Asked 3 months ago
1)you can form new company .dont poach existing clients
2) start with different product
As the option of voluntary winding up will be opposed by wife, submit an application Tribunal for winding up under Section 271 (e) giving details of matrimonial dispute and the resulting circumstances making continuation of company impossible.
She cannot approbate and reprobate. She has to agree on one thing.
Company winding up, or liquidation refers to the formal process through which a company concludes its operations, ultimately leading to its dissolution. This process entails the systematic closure of the company's affairs, including the sale of assets, settlement of debts from the proceeds, and distribution of any remaining surplus to the shareholders according to their stake in the company. The initiation of winding up occurs either by a court order or through a voluntary resolution passed by the company.
The objective of winding up is to ensure an orderly closure and distribution of the company's assets.
the following detailed procedure is to be followed:
Directors assess the company's financial position and declare its ability to pay all debts. This declaration, made on Form 107 as per Rule 269, is supported by an auditor's report.
The board convenes to decide on proposing voluntary winding up to the shareholders and schedules a General Meeting (Annual or Extraordinary) as per Section 362.
The resolution to wind up is published in the Official Gazette and newspapers within 10 days, ensuring public notification. A copy is also filed with the Registrar in compliance with Section 361.
Upon completing the winding-up process, the liquidator compiles a final report and financial account, summoning a meeting of members to present these documents. This step is conducted on Form 111 as per Rule 279, following Section 370.
Within a week following the final meeting, the liquidator submits a copy of the final report and accounts to the Registrar using Form 112, as dictated by Rule 279 and Section 370, marking the completion of the winding-up process.
Thus whatever agreement between you both can be decided in the meeting before applying for winding up.
You can seek for compulsory winding up,
The compulsory winding up of a private limited company is a legal process overseen by the tribunal. This action is typically initiated for several reasons, including:
The process begins with filing a petition to the tribunal, accompanied by a detailed statement of the company's affairs, requesting the winding up.
The tribunal appoints a liquidator to oversee and manage the winding-up process, ensuring the company's assets are fairly distributed to its creditors and shareholders.
The liquidator must submit a copy of the winding-up order to the ROC within 30 days. Failure to do so results in penalties
Upon a liquidator's appointment, the powers held by the company's directors, chief executive, and other officers are suspended, except for specific actions like notifying stakeholders of the winding-up resolution, appointing a liquidator, and similar procedural tasks.
The subsequent question posted in the latest post pertains to the practical issues involved based on the prevailing circumstances.
You can discuss with an experienced lawyer or consultant and take a decision based o the guidance and suggestions made accordingly
Dear Client,
To achieve your objective of winding up the company and starting a new one, you need to navigate several challenges and follow a structured approach. The main challenges include the legal deadlock due to your wife’s petition for the appointment of an administrator at the NCLT, which could delay or complicate the winding-up process. Additionally, her opposition to the winding-up and preference for continuing operations could hinder your plans. To address these issues, consider negotiating with your wife to reach a mutual agreement on asset distribution and company closure, possibly involving mediation to resolve disputes. If negotiations fail, you can file for voluntary winding up under Section 271 of the Companies Act, 2013, ensuring compliance with all legal requirements, including appointing a liquidator and distributing assets. To protect your new venture, clearly document and separate the assets and intellectual property from the old company. Seek legal advice to draft agreements that safeguard your interests and prevent future claims.
