What is the Difference Between Closure, Winding up, Dissolution of Company. In corporate law, the terms closure, winding up, and dissolution may seem similar, but they describe different stages of ending a company’s legal existence.
Knowing these differences helps business owners choose the correct method under the Companies Act, 2013.
Each term defines a unique step — from stopping business operations to legally removing the company from government records.
🏁 What Is Company Closure?
Closure happens when a company voluntarily stops all its operations and requests the Registrar of Companies (ROC) to strike off its name.
This process applies to companies that are inactive, have no liabilities, and have settled their accounts.
It takes place under Section 248(2) of the Companies Act, 2013, using Form STK-2.
People often call this the strike-off or Fast Track Exit (FTE) process.
👉 Example:
When a company has not carried on business for two consecutive years, it can apply for closure with ROC approval.
To simplify, closure means ending an inactive company’s existence without going through liquidation.
⚖️ What Is Winding Up of a Company?
Winding up is a legal process where the company’s assets are sold, its debts are paid, and the remaining funds are distributed among shareholders.
Unlike closure, it involves an official investigation and settlement of accounts.
There are two types of winding up:
1️⃣ Voluntary Winding Up:
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Started by the company itself when members decide to end operations.
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The company clears debts and distributes assets.
2️⃣ Compulsory Winding Up:
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Ordered by the National Company Law Tribunal (NCLT) when a company fails to meet its legal or financial obligations.
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The NCLT appoints a liquidator to manage the process.
👉 Example:
If a company cannot repay creditors or violates legal requirements, the NCLT directs the winding up.
Therefore, winding up acts as the middle stage between closure and final dissolution.
🧾 What Is Dissolution of a Company?
Dissolution marks the final step of ending a company’s legal status.
After this stage, the company no longer exists in the eyes of law.
Once dissolved, it cannot operate, own property, or file any returns.
After all dues are cleared and winding up is complete, the ROC or NCLT issues a dissolution order.
This order officially removes the company’s name from the government’s record.
👉 Example:
Once the liquidator submits the final report and the tribunal accepts it, the company is declared dissolved.
In short, dissolution is the official death certificate of a company.
📊 Closure vs Winding Up vs Dissolution
| 🔢 | Basis | Closure | Winding Up | Dissolution |
|---|---|---|---|---|
| 1 | Meaning | Voluntary removal of inactive company | Legal process of liquidation | Final legal termination |
| 2 | Law Section | Section 248 | Sections 270–365 | After winding up completion |
| 3 | Initiated By | Company itself | Company or NCLT | ROC or NCLT |
| 4 | Purpose | Remove inactive entity | Settle assets and liabilities | End legal existence |
| 5 | Legal Status | Exists till name struck off | Exists during liquidation | Ends completely |
| 6 | Form Used | STK-2 | Petition to NCLT | Dissolution Order |
| 7 | Duration | 3–6 months | 1–2 years | Immediate after order |
💡 Conclusion
To conclude, closure, winding up, and dissolution describe three separate stages in the life cycle of a company’s end.
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Closure is ideal for companies that are inactive and free from liabilities.
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Winding up applies when a company must liquidate assets and clear debts.
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Dissolution finally erases the company’s legal identity.
Understanding these stages allows businesses to choose the most suitable exit route while staying compliant with the Companies Act, 2013.
Hope you get the clarity about What is the Difference Between Closure, Winding up, Dissolution of Company.