Introduction
Closing a Private Limited Company in India involves a structured legal process to ensure compliance with the Companies Act, 2013. This process can be initiated voluntarily by the company’s directors and shareholders or compulsorily by the Registrar of Companies (ROC) under specific circumstances.
Methods of Closing a Private Limited Company
1. Striking Off by ROC
The ROC can strike off a company if it has not commenced business within one year of incorporation or has not carried out any business for two consecutive financial years and has not applied for dormant status.
2. Voluntary Winding Up
Initiated by the company’s shareholders, requiring the consent of at least 75% of members. This process involves liquidating the company’s assets to pay off liabilities before dissolution
3-Filing Application Form STK-2
A company can apply for striking off by submitting Form STK-2 to the ROC, provided it meets certain eligibility criteria
Eligibility Criteria for Striking Off
- The company should not have commenced business within one year of incorporation.
- It should not have carried out any business activity for the preceding two financial years.
- The company must have no pending litigations or liabilities.
- All regulatory filings and compliances should be up to date.
Documents Required
- Indemnity Bond signed by all directors (Form STK-3).
- Affidavit by all directors (Form STK-4).
- Statement of Accounts showing nil assets and liabilities, certified by a Chartered Accountant.
- Board Resolution authorizing the filing of the application.
- Consent of at least 75% of shareholders.
- Copy of the special resolution passed.
- Bank account closure statements.
Step-by-Step Process
1. Board Meeting
Convene a board meeting to pass a resolution for closing the company and authorize a director to proceed with the application.
2. Shareholders' Approval
Obtain consent from at least 75% of shareholders through a special resolution.
3. Settle Liabilities
Ensure all liabilities, including government dues, are settled.
4. Close Bank Accounts
Close all company bank accounts and obtain closure statements.
5. Prepare Documents
– Draft and notarize the required affidavits and indemnity bonds.
– Prepare a statement of accounts showing nil assets and liabilities.
6. File Form STK-2
Submit the application along with the necessary documents to the ROC.
7. Publication of Notice
The ROC will publish a notice in the Official Gazette, allowing for objections.
8. Striking Off
If no objections are received, the ROC will strike off the company and issue a notice of dissolution.
Benefits of Striking Off
- Eliminates the burden of ongoing compliance for inactive companies.
- Avoids penalties associated with non-compliance.
- Allows for better utilization of resources.
- Provides an option to restore the company within three years if needed.
Note
It is crucial to ensure that all statutory compliances are met before initiating the closure process to avoid legal complications. Engaging with professional services can facilitate a smooth and compliant closure.