How to Close a Private Limited Company in India?
Running a business comes with its own challenges. When the things do not work out properly a business may have to be shut down. You can have multiple reasons to close up or wind the company. Earlier, closing a company was a tedious process that required a lot of formalities, things have changed now and there are many quicker modes to close the firm.
Sell the Company
To sell off a Private Limited company is a kind of voluntary winding up. It can be effectively done by selling shares of the company. This is not exactly a winding up but the stakes are transferred to another individual or entity and the majority shareholders are settled of their stocks and responsibilities.
Mandatory Winding Up
Any company registered under the Companies Act, 2013 which did an unlawful act, fraudulent act, or even if the company contributed any kind of action in some fraudulent or unlawful activities then such company would be wound up mandatorily by the Tribunal. Here is the process of mandatory winding up:
- The petition is filed by the company or any contributors to the company or registrar of the companies or trade creditors of the company or central or state government.
- All the documents submitted by petition are audited by a practicing CA and the view given by the Auditor on the financial statement should be unqualified.
- The Petition needs to be advertised in newspapers daily at least for 14 days. The advertisement must be in English and regions language of that local area.
- Form 11 is mandatory for the order of liquidation of the company. Form 11 should include-
- Complete audited books of the accounts up to date of the order need to be submitted.
- Date, place and time for the company liquidator should be provided.
- Assets and the documents of the assets should be surrendered.
If the tribunal gets all the accounts in order and all the required compliance have been fulfilled, the tribunal would pass the order for resolving the company during the 60 days of receiving the claim. Once the tribunal order is passed, the registrant will then issue a notice to the Official Gazette affirming that such company is dissolved.
Voluntary Winding Up
Winding up a company voluntarily needs long procedural compliance to follow. There are some vital needs which have to be completed to close down a company voluntarily. A company can be wound up voluntarily in the situations mentioned below:
The company passes a resolution in its general meeting upon the expiry of the duration for which it is incorporated, or upon the occurrence of any event in respect of which the articles provide for its dissolution, or
The company passes a special resolution for a voluntary winding up on the firm.
The voluntary winding-up commences from the passing date of the resolutions mentioned above. The company should also appoint a Company liquidator in the same meeting. Such an appointment should also be confirmed by a majority of the creditors of the company.
Defunct Company Winding Up
According to the Companies Act, 2013, a defunct Company is a firm that has got the position of a Dormant Company. The government provides some relief to such defunct or dormant companies as there are no financial transactions which are carried out by the dormant companies.
A Defunct Company can be wound up with an advance process that needs the submission of the STK-2 form. Therefore, STK-2 is required to wind up a defunct company. The form STK-2 needs to fill by the Company Registrar and the same needs to be duly signed by the directors of the company and approved by its board.
For this scheme, a defunct company refers to a company which has:
- No asset and no liability
- Which has not commenced any business activity after its incorporation or
- It has not been carrying on any business activities since last one year prior to making an application under FTE
So these are the major processes by which a Private Limited Company can be closed. The process varies as per the reason for closing the company. With a clear understanding of the procedure, you can do the company closure quickly without any legal issues.
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