Sections 375 and 376 of Companies Act 2013: Winding Up of Unregistered and Foreign Companies

Sections 375 and 376 form Part II of Chapter XXI of the Companies Act, 2013. Section 375 deals with winding up of an "unregistered company", while Section 376 enables a body corporate incorporated outside India that has carried on business in India to be wound up as an unregistered company even where it has already been dissolved or has otherwise ceased to exist under the law of its country of incorporation.

Key points

An unregistered company may be wound up under the Companies Act, 2013, subject to Part II of Chapter XXI.
Section 375 expressly states that an unregistered company cannot be wound up voluntarily under that section.
The provision specifies circumstances in which an unregistered company may be wound up and situations in which it is deemed unable to pay its debts.
The statutory explanation defines what is excluded from, and what may be included within, the expression "unregistered company" for this Part.
Section 376 applies to certain foreign bodies corporate that carried on business in India and later ceased doing business in India.

Section 375 - Winding up of unregistered companies

Section 375 provides the statutory framework for winding up an unregistered company under the Companies Act, 2013. It applies the winding-up provisions of the Act subject to the exceptions and additions stated in the section.

When can an unregistered company be wound up?

Under Section 375(3), an unregistered company may be wound up if it is dissolved or has ceased to carry on business, if it is carrying on business only for winding up its affairs, if it is unable to pay its debts, or if the Tribunal considers it just and equitable to order winding up.

Meaning of inability to pay debts under Section 375

Section 375(4) sets out statutory situations in which an unregistered company is deemed unable to pay its debts. These include non-payment after a qualifying creditor demand, failure to deal with specified proceedings against a member after notice, an unsatisfied execution or other process, and other proof to the satisfaction of the Tribunal that the company cannot pay its debts.

Meaning of "unregistered company"

For this Part, the explanation to Section 375 excludes the categories specifically named in the provision and, subject to those exclusions, includes a partnership firm, limited liability partnership, society, co-operative society, association or company consisting of more than seven members when the winding-up petition is presented before the Tribunal.

Text of Section 375

(1) Subject to the provisions of this Part, any unregistered company may be wound up under this Act, in such manner as may be prescribed, and all the provisions of this Act, with respect to winding up shall apply to an unregistered company, with the exceptions and additions mentioned in sub-sections (2) to (4).

(2) No unregistered company shall be wound up under this Act voluntarily.

(3) An unregistered company may be wound up under the following circumstances, namely:--

(a) if the company is dissolved, or has ceased to carry on business, or is carrying on business only for the purpose of winding up its affairs;
(b) if the company is unable to pay its debts;
(c) if the Tribunal is of opinion that it is just and equitable that the company should be wound up.

(4) An unregistered company shall, for the purposes of this Act, be deemed to be unable to pay its debts--

(a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding one lakh rupees then due, has served on the company, by leaving at its principal place of business, or by delivering to the secretary, or some director, manager or principal officer of the company, or by otherwise serving in such manner as the Tribunal may approve or direct, a demand under his hand requiring the company to pay the sum so due, and the company has, for three weeks after the service of the demand, neglected to pay the sum or to secure or compound for it to the satisfaction of the creditor;
(b) if any suit or other legal proceeding has been instituted against any member for any debt or demand due, or claimed to be due, from the company, or from him in his character as a member, and notice in writing of the institution of the suit or other legal proceeding having been served on the company by leaving the same at its principal place of business or by delivering it to the secretary, or some director, manager or principal officer of the company or by otherwise serving the same in such manner as the Tribunal may approve or direct, the company has not, within ten days after service of the notice--
- (i) paid, secured or compounded for the debt or demand;
- (ii) procured the suit or other legal proceeding to be stayed; or
- (iii) indemnified the defendant to his satisfaction against the suit or other legal proceeding, and against all costs, damages and expenses to be incurred by him by reason of the same;
(c) if execution or other process issued on a decree or order of any Court or Tribunal in favour of a creditor against the company, or any member thereof as such, or any person authorised to be sued as nominal defendant on behalf of the company, is returned unsatisfied in whole or in part;
(d) if it is otherwise proved to the satisfaction of the Tribunal that the company is unable to pay its debts.

Explanation.-- For the purposes of this Part, the expression "unregistered company"--

(a) shall not include--
- (i) a railway company incorporated under any Act of Parliament or other Indian law or any Act of Parliament of the United Kingdom;
- (ii) a company registered under this Act; or
- (iii) a company registered under any previous companies law and not being a company the registered office whereof was in Burma, Aden, Pakistan immediately before the separation of that country from India; and
(b) save as aforesaid, shall include any partnership firm, limited liability partnership or society or co-operative society, association or company consisting of more than seven members at the time when the petition for winding up the partnership firm, limited liability partnership or society or co-operative society, association or company, as the case may be, is presented before the Tribunal.

Section 376 - Power to wind up foreign companies although dissolved

Section 376 addresses a body corporate incorporated outside India that has carried on business in India and then ceases to carry on business in India. The provision permits such a body corporate to be wound up as an unregistered company under Part II of Chapter XXI even if it has been dissolved or has otherwise ceased to exist under the law of the country in which it was incorporated.

Text of Section 376

Where a body corporate incorporated outside India which has been carrying on business in India, ceases to carry on business in India, it may be wound up as an unregistered company under this Part, notwithstanding that the body corporate has been dissolved or otherwise ceased to exist as such under or by virtue of the laws of the country under which it was incorporated.

Practical legal effect of Sections 375 and 376

Together, the provisions ensure that the winding-up jurisdiction under this Part is not confined to companies registered under the Companies Act. Section 375 identifies the statutory basis and conditions for winding up qualifying unregistered entities. Section 376 extends that framework to qualifying foreign bodies corporate even where dissolution or cessation under foreign law has already occurred.

Legal note: Winding-up and insolvency law must be read with other applicable provisions of the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016, where relevant to the entity and proceeding. The precise remedy and forum depend on the facts and the statutory route invoked.

Official legal resources

For the authoritative legislation and current regulatory material, see the India Code and the Ministry of Corporate Affairs.