What Is Meant By Private Company Closure?
Running a business comes with its own challenges. At times when things do not work out a business may have to be shut down. There can be numerous causes to close or wind up the company. The Process of Closing a Private Limited Company is referred to as Strike off or company closure. Company closure is done under newly notified rules Companies (Removal of Names of Companies) Rules, 2016 which is governed by section 248 of the Companies Act, 2013. If you aren’t running your company, we advise you to shut your Private Limited Company.
Why close a Private Ltd. Company?
If you aren’t running a company and no longer complying with the law then you can file Private Limited Company closure to avoid being in default. A dummy company, defunct company, the non-operative company can file for Company closure to avoid late penalties, etc.
How to Close a Private Limited Company?
Sell The Company
Selling a Private Limited Company is also a type of voluntary winding up. This can be done by selling shares of the company (selling the majority shares of the company). Technically speaking it is not an actual winding up but the shares are transferred to another person or entity and the majority shareholders are released of their stocks and responsibilities.
Companies that are registered in India under the Companies Act of India and have committed or contributed to fraudulent activity or fraudulent activity will be forcibly dissolved by the court.
Compulsory winding up involves the following steps:
Filing Of A Petition
The petition will be filed by the following:
The Company or
The Trade Creditors of the Company or
Any contributory or Contributors to the company or
Any or all part of the above mentioned three types or
The Central or State Government or
At the company registrar, the petition must be submitted three times in the form of WIN1 or WIN2. The petition shall be followed by an affidavit in Form WIN 3.
Statement Of Affairs Of The Company
All the documents accompanied by the petition should be audited by a practicing CA and the opinion given by the Auditor on the Financial Statement must be unqualified. The statement of affairs must be submitted in duplicate on Form WIN4 and must be documented by the affidavit on Form WIN5.
Advertisement For At Least 14 Days
The Petition must be advertised in the daily newspaper for at least 14 days and the language of the advertisement should be in the local language (local language of the area) and in English. The advertisement must be bought out under Form 6.
Proceedings Of The Tribunal
The Tribunal will hear the petition on the date set for hearing, accept objections and responses from the applicant and the respondent. The Tribunal may appoint a provisional liquidator. The order appointing a provisional liquidator shall be made according to Form WIN 8. The order of winding up shall determine:
Their duty is to provide a fully audited account up to the date of order.
Provides the date, time, and location for the Company Liquidator.
Handover the assets and the asset documents to the liquidator of the company. In the event of a winding-up, the Liquidator of the Company shall retain all assets and securities, liabilities, and the books and documents of the Company.
In the event of a resolution of dissolution, the Liquidator of the Company shall retain all assets and securities, liabilities, and the books and documents of the Company.
The company liquidator must submit a report to the arbitral tribunal within 60 days of the decision to dissolve.
After the company’s business is completely settled, the company’s liquidator applies to the tribunal for the dissolution of the company. If the tribunal finds it fair and reasonable in the circumstances of the case that an order for the dissolution of the company should be made, it shall issue an order to dissolve the company on the date of order. The company will dissolve accordingly.
The company liquidator must transfer a copy of the order to the registrar within 30 days of the date of the order.
If the tribunal determines that accounts are in order and all compliance requirements are met, it will order you to dissolve the company within 60 days of receiving your request. Afterward, the order has been passed by the tribunal, the registrar will then issue a notice to the Official Gazette affirming that such a company is dissolved.
Voluntary Winding Up
The voluntary dissolution of a company requires a long compliance process. There are certain mandatory requirements that must be met in order to voluntarily close the company. The company can voluntarily dissolve in the following situations:
The company will pass a resolution at the General Assembly after the end of the establishment period or after an event that is provided in the Articles of dissolution.
The company passes a special resolution (with the consent of at least 3/4th of the shareholders) for a voluntary winding up of the company. The voluntary dissolution begins on the day of the above resolution. The company must also appoint a company liquidator at the same meeting. Such appointments should also be confirmed by a majority of the company’s financial creditors.
Voluntary winding up involves the following steps:
The company passes a resolution in their general meeting as described above. Though, a majority of directors must agree to wind up.
The consent of the Trade Creditors is also required for the dissolution of the company. Trade Creditors must agree that they are not obligated if the company is liquidated.
The Company must issue a statement of solvency, which same must be accepted by the trade creditors of the company. The company must prove its credibility with a solvency statement.
The liquidator so appointed will carry out the liquidation procedure and prepare a liquidation report for assets, properties, debts, etc. The report shall be submitted to the general meeting of the company to approve the liquidation and make a resolution for the dissolution of the company. The Company liquidator shall send a copy of the company’s final account and resolutions to the ROC
The Company liquidator shall also apply application to the Tribunal for an order to dissolve the company. After being satisfied with the winding up, the Tribunal will issue a dissolution order within 60 days of the application. A copy of the final order must be submitted to the ROC.
All the above-mentioned procedures must be submitted and archived in the prescribed format and the company name cannot be assigned to other applicants for two years, even after the company has been dissolved.
The various form formats and detailed procedures for winding up are prescribed in Companies (Winding-up) Rules, 2020.
Defunct Company Winding Up
As per the Companies Act, 2013, a Defunct Company is a company that has acquired the status of a dormant company. The government grants certain facilities to such dormant companies or dormant companies because there are no financial transactions with the dormant companies.
The Companies Act, 2013 established the procedure for winding up a Defunct Company. A Defunct or Dormant Company can be dissolved using a fast-track procedure that requires the submission of the STK-2 form. Therefore, Form STK-2 is required in order to wind up a Defunct Company and there are no additional procedures for that. The form STK-2 has to be filled with the Registrar of Companies and the same needs to be duly signed by the director of the company approved by his board.