In India, closing a Private Limited Company is possible in two various ways – mandatory winding-up and striking off. A closure is required when the Corporation fails to comply with a lot of mandatory compliances. Hence, if an organization is incapable to carry out its business procedures for a considerable time and does not require it to revive shortly, it is better to close that Company and avoid penalties resulting from non-compliances.
There can be many types of procedures for closing a Private Limited Company:
Compulsory Winding Up of a Company
- Company’s due debts;
- A specific resolution declared for winding up;
- An illegal act by a corporation or the management of the Company;
- Dishonest act or mischief by the Company or the control of the Association;
- Default in filing a yearly return or financial accounts with the Registrar of Companies (ROC) for 5 continuing years;
Procedure
- File an appeal to the Tribunal along with the Statement of interests of the Company;
- The Tribunal will both accept or reject the appeal based on different criteria;
- Where a person other than the Organization files a petition, Tribunal may direct the Firm to file the rejection. It goes along with the Account of affairs within 30 days;
- The Tribunal shall elect a Liquidator for the winding-up process;
- The liquidator shall carry out the purposes of supporting and monitoring liquidation procedures (taking over of assets, review, and examination of books of accounts, sale of assets, any other function, etc.). He/She shall appoint a draft statement for permission from the winding-up committee;
- On permission of the wind report, the liquidator shall submit the last report to the Tribunal for passing a winding-up order.
- A liquidator A duplicate copy of the order shall be delivered to ROC (Registrar of Companies) by the liquidator within 30 days. Any negligence in doing so leads to a penalty.
- When ROC (Registrar of Companies) is fully satisfied, it permits winding up of the Company and strikes of its name from the Register of Companies;
- ROC sends a notification for publication in the Formal Gazette of India.
Voluntary Winding Up of a Company
This type of winding up of the Company is possible each by resolution in a general meeting or passing a special resolution.
Following reasons can be same:
- The existence of any situation in AOA (Articles of Association) producing for winding up of the Company;
- The Association voluntarily chooses to wind up.
Procedure
- Pass a decision in a general meeting for the events discussed in AOA or a special resolution for voluntary decision and a creditors’ meeting;
- Provide a statement of the stability of the Company for the payment of unpaid debts;
- Submit the statement of stability along with auditor’s report and certified valuer’s report (in case of valuation of assets of the Company) to ROC;
- Elect a Liquidator for winding up proceedings. Winding up proceedings shall begin from the date of moving resolution;
- The liquidator shall prepare a report of shut down and call a general meeting of the Corporation for producing last winding up accounts;
- If the majority members agree to it, a decision shall be passed;
Fast Track Exit Scheme
This types of winding up are for striking off the name of Defunct organizations from the register of companies
- A corporation that does not have any assets or liabilities;
- Any corporation that does not commence its business activity after the association;
- When an organization has not carried out any business activity for at least one year
Procedure
- Post an application to ROC (Registrar of Companies) in Form FTE with required government fee (paid online);
- ROC considers the request and sends notice to the Organization by e-mail that the name of the Company is off from the Register of Companies. Also, it mentions that the winding-up procedures shall start in case of the absence of anything opposed within 30 days;
- It places the names of candidates and the date of making an application on the MCA portal, providing an opportunity to the stakeholders to increase objections against winding up, if any, within 30 days;