Running a business comes with many complications and challenges. Sometimes these problems become insurmountable and require businesses to go out of business. This article will tell you when to close the store.
There are several ways to wind up a private limited company in India, such as company sale, compulsory liquidation, voluntary liquidation of a company, and liquidation of a non-existent company.
Closing a private limited company is a tedious but necessary procedure. Without it, you would have to meet the requirements of your company’s registrar every year (i.e., you would have to pay for audits and compliance). Of course, the main reason you want to do this is that it frees you up to invest and the assets you create. Company liquidation proceedings may be initiated either voluntarily by shareholders or by court order.
First, we discuss the voluntary winding up of the company, then the forced closure. For step-by-step information on company registration, ISO registration, or income tax-related services, check out our other articles and useful resources to help you through the process. We are one of the leading online service providers in the tax registration and legal documents market.
Voluntary Winding-up of a Company
When Shareholders Can Wind up a Company
To initiate the winding up of the company, shareholders must:
1. Adoption of a special resolution by the board of directors.
2. The general meeting decides on the winding up of the company due to the expiration of the period stipulated in the Articles of Incorporation (AoA) or the fulfilment of the liquidation requirements stipulated in the AoA.
Procedure for Winding Up
1. Most directors (or both) must convene the meeting of the Board of Directors. The Board of Directors should specify that the company cannot have debt or revenge on the salary company. Finally, the date, time, and agenda must provide notification and appropriate explanation of the meeting and the conference of the meeting for five weeks the meeting.
2. On the day of the general meeting, pass an ordinary resolution with the ordinary majority or a special resolution with a 3/4th majority. Director must meet with the company’s creditors immediately. 2 / 3rds, in value conditions, the lending agency agrees to the company’s products can be voluntarily enriched. Otherwise, the Court must complete the company.
3. After passing the permission, you must notify the company’s recorder within 10 days and assign the liquidators. The power of the director will be transferred to this person, and he is mainly responsible for accumulating all the assets of the company and paying the debt. The surplus will be distributed among members.
4. After passing through the resolution, the official newspaper and the local ad notification must be provided within 14 days.
5. Within 30 days of the resolution, you should explain the statement that there are no assets and liabilities, except for capital and profit and a debit balance of impairment. affidavit and compensation must be all directors. If you have an uninstalled loan, you must send a failure letter.
6. Calling the General Board Conference and special permissions can be disposed of.
7. Submit the report and special decision to the registrar within two weeks. If the Registrar is satisfied, he will issue an order to wind up the company within 60 days.
Closure by a Tribunal
The Companies Act 2013 included several new rules for winding up companies and updated the rules contained in the Companies Act 1956. The main point is that the law states that a company may be liquidated by court order for one or more of the following reasons:
1. . If the company is unable to repay its debts
2. When there is a resolution that the institution (company) may be dissolved or liquidated through the court under certain conditions
3. In addition, if the company has not submitted financial statements or financial statements for 5 consecutive years
4. In case the company interferes with the relationship between neighboring countries or foreign countries by acting against the integrity and sovereignty of the country
5. If the tribunal decides that the only right thing it can do (by its judgment or Chapter XIX) is to liquidate the company’s business;
6. In other cases where the company or its participants engage in illegal transactions, obtain financial benefits through fraudulent transactions, or when the company gains profits through fraudulent means
7. In the above case, an arbitration court is formed and decides to terminate the activities of the company under study. Such decision of the Tribunal shall be deemed final and upon hearing the order, Dissolution Form 11 will be issued.
Procedure for Winding up by Court or Tribunal
1. The court or tribunal commences the proceedings by notifying the official liquidator. This person is responsible for the company and carries out liquidation procedures for the company.
2. The court will also prepare a liquidation order to be served on all creditors and savers and ask them to proceed. An order is also issued to the petitioner for liquidation.
3. A liquidator appointed by the central government checks the company’s books, cash holdings, bank balances, liabilities, creditors, and credit.
4. The official liquidator shall submit the following account preliminary report to the court within the next six months. Debts, debtors, cash, and negotiable securities. The liquidator also indicates whether an investigation into the company’s activities is necessary.
5. If the liquidator does not request this, he or she must take care to ensure that the funds available are distributed equitably to all creditors until exhausted. The liquidator gives the court a full explanation of how the funds, assets, and operations were divided.
6. The court decides to dissolve the company after verifying the account
Selling a company is similar to closing the company voluntarily, but the stake is transferred to someone else.
If a company is involved in any kind of illegal activity, it must be shut down.
If a company requires voluntary closure, certain mandatory procedures must be followed before closing the company. If Form STK-2 is required to be submitted in advance, the lost company may go out of business. The actions of the company promote liquidation.