Closing of Company

Closure of Company denotes closure of Business. There are many reasons due to which business are closed down and whenever such a condition arises then there are certain procedures which are required to be followed in order to lawfully close a business entity.

A Company can be closed by following Methods

  • Transfer of Ownership
  • Compulsory Winding Up
  • Voluntary Winding Up
  • Strike off in case of Defunct Companies

Transfer of Ownership

By transferring the majority stake in the company (i.e. the majority shareholding) to other person or other entity a company can be sold. Basically it is not an actual winding up but the stakes are transferred to another person or entity and the majority shareholders are discharged of their stocks and responsibilities.

Winding Up of a Company

Winding Up Meaning

A Company is an Artificial Judicial Person and requires various compliances For E g. Regular Filing of Income Tax Return, Annual Return Filing and more. Failing to maintain compliance for a Company could result in fines and/or disqualification of the Directors from incorporating another Company. Therefore, in case private limited company has become inactive and there are no transactions in the company, then it is best to wind up the Company.

Winding up of a company can be initiated at anytime by the shareholders of the company. Once, all activities are stopped, debts repaid and all statutory and non- statutory liabilities are discharged and the registrations are surrendered, the winding up application petition can be filed with the Ministry of Corporate Affairs.

Winding up of a Company can be done in two ways:-

  • Compulsory Winding Up: As per Companies Act 2013, a company can be wound up by a Tribunal, if:
    • The company is unable to pay its debts.
    • The company has by special resolution resolved that the company be wound up by the Tribunal.
    • The company has acted against the interest of the sovereignty and integrity of India, the security of the State, friendly relations with foreign states, public order, decency or morality.
    • The Tribunal has ordered the winding up of the company under Chapter XIX.
    • If the company has not filed financial statements or annual returns for the preceding five consecutive financial years.
    • If the Tribunal is of the opinion that it is just and equitable that be company should be wound up.
    • If the affairs of the company have been conducted in a fraudulent manner of the company was formed for fraudulent and unlawful purposes or the persons concerned in the formation or management of its affairs have been guilty of fraud, misfeasance or misconduct in connection therewith and it is proper that the company be wound up.
  • Voluntary Winding up: The winding up of a company can also be done voluntarily by the members of the Company, if:
    • If the company passes a special resolution for winding up of the Company.
    • The company in general meeting passes a resolution requiring the company to be wound up voluntarily after the expiry of the period of its duration, if any. Fixed by its articles of association or on the occurrence of any event in respect of which the articles of association provide that the company should be dissolved.

Procedure for Voluntary Winding up of a Company

The following are the steps for initiating a voluntary winding up of a Company:

Conduct a Board Meeting with minimum two Directors or by a majority of Directors. Pass a resolution with a declaration by the Directors as required under the Companies Act, 2013. Also, fix a date, place, time agenda for a General Meeting of the Company after five weeks of this Board Meeting.

Send Notice for calling the General Meeting of the Company proposing the resolutions, with explanatory statement.

In the General Meeting, pass the ordinary resolution for winding up of the company by ordinary majority or special resolution by ¾ majority. The winding up of the company shall commence from the date of passing of this resolution.

Now pass a resolution of winding up of the Company, conduct a meeting of the Creditors. If two thirds in value of creditors of the company are of the opinion that it is in the interest of all parties to wind up the company, then the company can be wound up voluntarily. If the company cannot meet all its liabilities on winding up, then the Company must be wound up by a Tribunal.

Within 10 days of passing of resolution for winding up of company, file a notice with the Registrar for appointment of liquidator.

Within 14 days of passing of resolution for winding up of company, give a notice of the resolution in the Official Gazette and also advertise in a newspaper with circulation in the district where the registered office is present.

Within 30 days of General Meeting for winding up of company, file certified copies of the ordinary or special resolution passed in the General Meeting for winding up of the company.

Prepare the liquidators account of the winding up of the company and get the same audited.

Call for final General Meeting of the Company.

Pass a Special Resolution for disposal of the books and papers of the company when the affairs of the company are completely wound up and it is about to be dissolved.

Within two weeks of final General Meeting of the Company, file a copy of the accounts and file and application to the Tribunal for passing an order for dissolution of the company.

If the Tribunal is satisfied, the Tribunal shall pass an order dissolving the company within 60 days of receiving the application. The company liquidator would then file a copy of the order with the Registrar.

The Registrar, on receiving the copy of the order passed will publish a notice in the Official Gazette that the company is dissolved.

Strike off of a company

As per the Companies Act, 2013, Sec 248 deals with the provisions of Strike Off the name of Company From Register Of Companies. The section provides of two grounds for strike off. It says that a company can be struck off if ROC is satisfied on the following two grounds:

  • The Company has failed to commence its business within one year from its incorporation Or
  • The Company is not carrying on any business or operation for period of immediately preceding two financial years and has not made any application for obtaining status of dormant company.

Methods of strike off:

  • By ROC – taking a suo moto action
  • By company – making an application to strike off in form STK-2 to ROC

Strike off by ROC – taking a suo moto action

If ROC has reasonable grounds to belief that a company has satisfied the criteria u/s 248(1), ROC will send notice of his intention to remove name of the company from Register Of Companies, to the concerned company and all its directors specifying them to send their representations and relevant documents within the period of 30 days.

Strike off by company- making an application to strike off in form STK-2 TO ROC

Procedure to be followed by a company in case of strike off application:

  • Conduct a Board Meeting to decide on the matters of strike off, extinguishing all liabilities of company and calling of EGM to pass a special resolution for strike off. (Alternatively company can obtained written consent of 75% shareholders in terms of paid up capital in which case there is no need to call EGM)
  • Send EGM Notice
  • Hold the EGM, pass a special resolution and file e-form MGT-14 with ROC within 30 days of passing of such resolution.
  • Make an application of Strike off in Form STK-2 to ROC

Documents to be submitted with strike off application in Form STK-2

Indemnity bond duly notarized by every director in Form STK 3;

A statement of accounts containing assets and liabilities of the company made up to a day, not more than thirty days before the date of application and certified by a Chartered Accountant;

An affidavit in Form STK 4 by every directors of the company;

A copy of the special resolution duly certified by each of the directors of the company or consent of 75% of the members of the company in terms of paid up share capital as on the date of application;

A statement regarding pending litigations, if any, involving the company.

ROC Action

The ROC may, in case of its suo moto action to stike off u/s 248(1) or on receipt of strike off application u/s 248(2), causes a public notice to be issued in the prescribed manner.

The notice shall be in the Form of STK 5 OR STK 6 and be:

  • Placed of website of MCA
  • Published in official gazette
  • Published in newspaper in English and vernacular language both having wide circulation in the state where registered office of the company is situated

ROC shall simultaneously intimate the concerned regulatory authorities’ viz. income tax etc. about the proposed action of strike off and seek the objections if any, to be furnished within the period of 30 days from the date of such intimation.

ROC my on expiry of the period mentioned in the notice, pass an order of striking off the name of company from register of companies and publish a notice thereof in official gazette. On publication of such notice in official gazette company shall stand dissolved.

Documents Required for Company Closure

Bank Account Closure Certificate

PAN Card and Aadhaar Card of all the Directors

PAN Card and Aadhaar Card of all the Shareholders

All ITR and Returns Filed with ROC

Board Resolution Authorizing the Closure

Affidavit from all the Directors

Indemnity Bond from all the Directors

Pricing

Normal

Starting at Rs. 19,999 /- Onwards
  • Closure of private limited company which has completed GST and Income tax compliance.

Standard

Starting at Rs. 27,999 /- Onwards
  • Closure of private limited company including GST surrender and last one income tax filing.

Executive

Starting at Rs. 35,999 /- Onwards
  • Closure of private limited company including GST surrender and last two income tax filing, if time for filing available.

Start Here

Upload Documents

Upload Documents

Fill Form

Filling up form (for 10 percent additional discount)

Payment Gateway

Payment Gateway

Incorporation Process Initiate

Incorporation Process Initiate

Start Here

Upload Documents
Filling up form (for 10 percent
additional discount)
Payment gateway
Incorporation process initiate

Frequently Asked Questions

Can a Struck off company still trade?

When a company is struck off, the name would be removed from the company register and it cannot trade, sell its assets or make payments or even it cannot get involved in any other business activities. The name of the company would be made available for new companies to use.

What does strike off of a company mean?

Strike Off means removing the name of the Company from the Register of Companies maintained by the Registrar of Companies.

It is more like a Closure of the Company and the Company will not be in existence after being Struck Off and cannot perform any operation thereafter.

Is ROC filing mandatory before company strike off Application?

Yes, it is a mandatory process to solve as the MCA database has to stay updated that the company is free from all the legal ties.

What is the time limit to file closure documents with ROC?

The Form has to filled be filed with ROC office within 30 days from the date of Signing of the Statement of Assets and Liabilities.

what is the basic eligibility criteria for closing a company?

The primary factor is that the company must at least be 1 year old in terms of nature of functioning in order to apply for closing.