- Close a Private Limited Company
Close a Private Limited Company
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Closure of a Private limited company
If the company’s owners or directors decide to shut down the operation, they may look into possibilities for closure. Striking a company’s name from the Register of Companies is the most practical or simple approach to end a business. When a corporation lies dormant for a while, this is preferable. A winding-up petition is another choice, but it requires more effort, time, and compliance.
The company’s name is erased from the register after the strike off is approved, making it legally nonexistent. Before moving forward with the strike-off application, the organization must complete all compliance requirements. The application is supported by a number of documents and calls for expert assistance.
Ways of winding up of a company in India
Closure of a Private limited company
Winding up
This option is preferred when the company is in the operative stage and has assets and liabilities. It will include approval from Members, Directors, and creditors. It also requires appointing a liquidator for the said process to manage the company’s affairs during the whole process. It is often time-consuming process.
Striking off
Striking off is preferred by a company which has relatively no or less outside liabilities. When a company is inoperative since its inception or in the past two years, it may apply for strike-off, often referred as fast-track exit. The primary condition is that the company has no assets or liabilities and has complied with relevant applicable provisions.
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It can be filed only when the company repays or extinguishes all its liabilities and receive a No Objection Certificate (NOC) from the creditors before filing the closure application. And conduct a meeting where all the directors decide upon the closure by signing a special resolution or a consent of seventy-five percent members regarding paid up share capital.
The Registrar of Companies can remove the company name from the list of companies if, he has reasonable cause to believe that:
● A Company failed to commence its business within one year of its incorporation; or
● A company is not carrying on any business or operation for two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company.
The closure is the best option in case the company is not running as it:
Saves the yearly compliance cost
No non-compliance risk.
No risk of high penalties and prosecutions
No risk of getting into default
RoC will publish a list of companies struck off in the Official Gazette. The Company under fast-track exit mode will be considered closed from the date of publication of the notice in Official Gazette.
The closing documents have to be filed within 30 days from the date of signing of the assets and liabilities statement.
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