Running a business is very challenging. A situation may rise wherein things go out of hand and the business owner may have to shut down his business. If your company is registered as a Private Limited Company and you’re facing continuous losses, it is better to wind up your company. A Private Limited Company can be shut due to both voluntary and involuntary circumstances.
Process involved in the closure of a Private Limited Company
Selling the company
Selling a private limited company is also a kind of voluntary winding up. It is done by selling the shares of a Pvt Ltd company. Technically, it does not mean the actual winding up but, the transfer of shares to another person. Majority of the shareholders will be discharged from their responsibilities.
Compulsory winding up
Any company registered under The Companies Act, which has committed an unlawful act, a fraudulent act or even contributed to the fraudulent act will be compulsorily wound up by the tribunal.
- All the documents should be audited by a practicing CA
- The petition should be advertised for a period of 14 days in the regional language and in English under Form 6.
- Filing of Form 11 for the order of winding up the company
- The updated book of accounts has to be submitted
- Mention date, time and place for company liquidator
- If all the required compliances have been satisfied, the tribunal will pass the order to dissolve the company in 60 days. Once the company is dissolved, the registrar issues a notice to the official gazette stating that the company is dissolved.
Voluntary winding up a company
Winding up a company voluntarily is a long procedure compliance to follow. There are mandatory requirements to close down a private limited company.
- A board meeting with the majority of members agreeing upon the winding up of the company is required.
- A special resolution is required where 3/4th of the shareholders present must vote in favour of winding the company.
- Consent of the trade creditors is required.
- A declaration of solvency needs to be made by the company and the same has to be accepted by the trade creditors.
- A report of assets, liabilities, capitals etc has to be made by the liquidator appointed.
- The company’s name will be prohibited for a period of 2 years even after winding up of the company.
Defunct Company Winding up
According to The Companies Act, 2013, a company that has gained a dormant status is a defunct company. These companies do not have any financial transaction and therefore, the government has provided certain relief to these companies. A defunct company is wound up through the fast track procedure on submission of STK-2 Form. The form has to be filled with the Registrar or Companies and the same has to be signed by the Director of the company as well.
A defunct company refers to a company that has:
- No assets and liabilities
- No commencement of business activities since the incorporation
- No business activities for a period of one year prior to making an application under Fast Track Exit Scheme