Companies Act 2013 Section 375
Companies Act 2013 Section 375 governs the winding up of companies by the Tribunal under insolvency proceedings.
Companies Act 2013 Section 375 deals with the winding up of companies by the Tribunal, particularly under insolvency and bankruptcy proceedings. This section is crucial for managing the closure of companies that are unable to meet their financial obligations. It provides a legal framework for orderly winding up, protecting the interests of creditors, shareholders, and other stakeholders.
Understanding Section 375 is essential for directors, shareholders, insolvency professionals, and companies to ensure compliance with legal procedures during winding up. It helps in safeguarding rights and minimizing disputes during the dissolution process.
Companies Act Section 375 – Exact Provision
This section clarifies that when the Tribunal orders winding up under the Insolvency and Bankruptcy Code (IBC), 2016, the winding up provisions of the Companies Act, 2013 will apply in conjunction with the IBC. It ensures that the legal framework for winding up is consistent and integrated with insolvency laws.
Applies winding up provisions of Companies Act alongside IBC.
Ensures orderly dissolution of insolvent companies.
Protects interests of creditors and stakeholders.
Facilitates legal clarity during insolvency proceedings.
Supports Tribunal’s authority in winding up decisions.
Explanation of Companies Act Section 375
This section states that when a company is wound up by the Tribunal under the IBC, the winding up provisions of the Companies Act apply subject to the IBC’s provisions.
Applies to companies ordered to be wound up by the Tribunal.
Relevant to directors, creditors, insolvency professionals, and shareholders.
Mandates compliance with winding up rules under the Companies Act.
Triggered by Tribunal’s winding up order under IBC.
Permits integration of Companies Act and IBC procedures.
Restricts conflicting provisions by prioritizing IBC rules.
Purpose and Rationale of Companies Act Section 375
The section aims to harmonize the winding up process under the Companies Act with the Insolvency and Bankruptcy Code. This integration strengthens corporate insolvency resolution and liquidation frameworks.
Strengthens corporate governance during insolvency.
Protects rights of creditors and stakeholders.
Ensures transparency and accountability in winding up.
Prevents misuse of corporate structure during insolvency.
When Companies Act Section 375 Applies
This section applies when the Tribunal orders winding up of a company under the IBC, ensuring that Companies Act provisions govern the process alongside the IBC.
Applicable to companies under Tribunal’s winding up order.
Relevant for insolvency and liquidation proceedings.
Triggered by insolvency resolution failure or liquidation order.
Excludes voluntary winding up not ordered by Tribunal.
Legal Effect of Companies Act Section 375
Section 375 creates a legal bridge between the Companies Act and the Insolvency and Bankruptcy Code. It imposes duties and procedural requirements on companies and insolvency professionals during winding up. Non-compliance may lead to penalties under both laws. It ensures that winding up under insolvency is conducted with statutory safeguards and approvals.
Creates combined compliance duties under Companies Act and IBC.
Impacts corporate actions during insolvency and liquidation.
Non-compliance can attract penalties and legal consequences.
Nature of Compliance or Obligation under Companies Act Section 375
Compliance with Section 375 is mandatory when winding up is ordered by the Tribunal under the IBC. It is an ongoing obligation throughout the liquidation process. Directors and insolvency professionals must ensure adherence to procedural rules. Internal governance is affected as control shifts to the liquidator under legal supervision.
Mandatory compliance during Tribunal-ordered winding up.
Ongoing obligation until completion of liquidation.
Responsibility lies with liquidators and company officers.
Internal governance transitions to liquidator’s control.
Stage of Corporate Action Where Section Applies
This section applies primarily at the winding up stage initiated by the Tribunal under insolvency proceedings. It governs the liquidation and dissolution phases.
Triggered after Tribunal’s winding up order.
Applies during liquidation and asset distribution.
Relevant during creditor claims and settlements.
Ends with company dissolution and removal from register.
Penalties and Consequences under Companies Act Section 375
Failure to comply with winding up provisions under this section can lead to penalties under the Companies Act and the IBC. These include monetary fines, possible imprisonment for fraudulent conduct, and disqualification of directors. Additional fees and remedial directions may be imposed by the Tribunal or regulatory authorities.
Monetary fines for procedural violations.
Imprisonment for fraud or misconduct.
Disqualification of directors and officers.
Additional fees and Tribunal directives.
Example of Companies Act Section 375 in Practical Use
Company X was declared insolvent and the Tribunal ordered its winding up under the IBC. The appointed liquidator followed the Companies Act winding up provisions alongside the IBC rules. Creditors were paid from asset sales, and the company was dissolved legally. This ensured an orderly closure protecting stakeholder interests.
Demonstrates integration of Companies Act and IBC in practice.
Highlights importance of legal compliance during winding up.
Historical Background of Companies Act Section 375
Section 375 was introduced in the Companies Act, 2013 to align winding up procedures with the Insolvency and Bankruptcy Code, 2016. It replaced older provisions under the Companies Act, 1956, reflecting modern insolvency frameworks. Amendments have refined the interplay between corporate and insolvency laws.
Shifted from Companies Act, 1956 to 2013 Act framework.
Introduced to harmonize with IBC, 2016.
Major reforms to streamline insolvency and winding up.
Modern Relevance of Companies Act Section 375
In 2026, Section 375 remains vital for managing corporate insolvency with digital filings and MCA portal integration. It supports e-governance and compliance trends, aligning with ESG and CSR considerations during winding up. The section ensures transparent and efficient liquidation processes.
Supports digital compliance via MCA portal.
Facilitates governance reforms in insolvency.
Maintains practical importance in corporate restructuring.
Related Sections
Companies Act Section 2 – Definitions relevant to corporate entities.
Companies Act Section 7 – Incorporation of company.
Companies Act Section 248 – Power to remove name of company from register.
Companies Act Section 434 – Winding up by Tribunal.
Insolvency and Bankruptcy Code Section 33 – Liquidation process.
IPC Section 420 – Cheating and dishonestly inducing delivery of property.
Case References under Companies Act Section 375
- Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India (2019, SCC 130)
– Affirmed the primacy of IBC over Companies Act in insolvency resolution and winding up.
- Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta (2019, SCC 408)
– Clarified roles of Tribunal and insolvency professionals in winding up under IBC.
Key Facts Summary for Companies Act Section 375
Section: 375
Title: Winding Up by Tribunal under Insolvency Proceedings
Category: Insolvency, Corporate Governance, Compliance
Applies To: Companies, Directors, Insolvency Professionals, Creditors
Compliance Nature: Mandatory during Tribunal-ordered winding up
Penalties: Monetary fines, imprisonment, disqualification
Related Filings: MCA portal filings, Tribunal applications
Conclusion on Companies Act Section 375
Companies Act Section 375 plays a critical role in integrating the winding up provisions of the Companies Act with the Insolvency and Bankruptcy Code. It ensures that companies undergoing insolvency are wound up in a legally compliant, transparent, and orderly manner. This protects the interests of creditors, shareholders, and other stakeholders during a challenging corporate phase.
For directors, insolvency professionals, and companies, understanding Section 375 is essential to navigate the complexities of insolvency and liquidation. It provides clarity on procedural requirements and legal duties, supporting effective corporate governance and compliance in insolvency scenarios.
FAQs on Companies Act Section 375
What does Section 375 of the Companies Act 2013 cover?
Section 375 governs the winding up of companies by the Tribunal under insolvency proceedings, applying Companies Act provisions alongside the Insolvency and Bankruptcy Code.
Who must comply with Section 375?
Companies ordered to be wound up by the Tribunal, their directors, insolvency professionals, and creditors must comply with Section 375 during the winding up process.
When does Section 375 apply?
It applies when the Tribunal orders winding up of a company under the Insolvency and Bankruptcy Code, ensuring coordinated legal procedures.
What are the penalties for non-compliance with Section 375?
Penalties include monetary fines, imprisonment for fraud, disqualification of directors, and other remedial actions under the Companies Act and IBC.
How does Section 375 relate to the Insolvency and Bankruptcy Code?
Section 375 integrates the winding up provisions of the Companies Act with the IBC, ensuring that insolvency proceedings follow a consistent legal framework.