The Companies Act lays down the provisions and the procedures for winding up operations leading to the dissolution of the company. Winding up may be either through court or voluntarily by the members of the company.
Before a company can initiate such proceedings under the Companies Act, it must seek clearance from the government for closure of the unit and displacement of labour under the Industrial Disputes Act.
A sick or a potentially sick company that has been referred to the Board of Financial and Industrial Reconstruction may be wound up pursuant to an order passed by the Board.
If a company wishes to close down a manufacturing unit without dissolving itself, it requires clearance from the government under the Industrial Disputes Act.
For final settlement to members of the Company Board, prior permission of RBI is required. This permission is to be taken once the final amount for payment has been ascertained.
Centre for Monitoring Indian Economy, Bombay
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Last updated: May 1995.