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Updated on 24 Nov 2020  9.00 AM IST | 4 min read

Close Private Limited Company in India

If your business is not running properly in a private limited company or you are facing continuous losses in your business, it is better to close your private limited company and start a new journey. Private limited company also needs to be shut down when there are no exchanges or directors of the company not ready to start its operations.

There are 4 ways by which private limited company business comes to an end –

  1. Sell the company
  2. Voluntary winding up
  3. Compulsory winding up
  4. Defunct company winding up

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Sell The Company

One way of voluntarily winding up the company is selling the company to some other party. A company can be sold by selling the majority of shares of the company to any other party. As per technical context, it is not winding up; it is a relief from the responsibilities of the person who is ready for winding it up.


Voluntary Winding Up

Voluntary winding up of a private limited company is a long procedure. Voluntary winding up of company means winding up of a company by its members voluntarily. Winding up of a company can be done voluntarily by the members, if –

  • The company passes a special resolution to wind up the company
  • The company passes a resolution in the general meeting to wind up voluntarily as a result of the expiry of the period of its duration as per articles of association or any event occurred with respect of which articles of association declares that the company should be dissolved.

Procedure Of Voluntarily Winding Up Of Private Limited Company

The procedure of voluntarily winding up of a private limited company is as follows –

  1. Step 1 – Firstly, conduct a board meeting with 2 directors to pass a resolution along with the declaration that the company has no debts and the company is in a position to pay its creditors after selling company’s assets.
  2. Step 2 – In the second step, company issues a written notice to call a general meeting along with explanatory statement proposing the resolution.
  3. Step 3 – In the third step, Company pass the ordinary resolution in the general meeting for the purpose of winding up by ordinary majority or 3/4th of the majority by passing the special resolution.
  4. Step 4 – After passing the special resolution in the third step, conduct a meeting of creditors and if majority of the creditors are having the same opinion that winding up of a company is beneficial for all the parties, company will be winded voluntarily.
  5. Step 5 – After taking the decision in the creditors meeting to wind up the company, file a notice with the registrar to appoint a liquidator within 10 days after passing of resolution.
  6. Step 6 – In the sixth step, company has to give notice of the resolution in the official gazette and also advertise the same in the newspaper within 14 days after passing of resolution.
  7. Step 7 – In the 7th step, company has to file certified copies of resolution (ordinary or special) passed within 30 days of the general meeting.
  8. Step 8 – In the 8th step, wind up the affairs of the company, prepare the liquidator account and auditors will audit the same.
  9. Step 9 – In the 9th step, company conducts a general meeting
  10. Step 10 – In the 10th step, company pass a special resolution in the general meeting to dispose books and all other necessary documents after winding up the affairs of the company.
  11. Step 11 – In the 11th step, company submits account copy as well as application to the tribunal within 15 days of the first general meeting to pass order for dissolution.
  12. Step 12 – In the 12th step, If a tribunal found that your all accounts are in order and company has followed all the necessary compliances, tribunal will pass the order for dissolving the company within 60 days of receiving the application
  13. Step 13 – The appointed liquidator submits a copy of order with the registrar in step - 13.
  14. Step 14 – In step – 14, registrar publish a notice on the official gazette declaring that the company is dissolved after receiving the order passed by tribunal.

Compulsory Winding Up

According to companies act 2013, any company who has done any fraudulent or illegal activity or having any involvement in any unlawful or illegal act, than the company will be mandatorily wind up by the tribunal.

Procedure For Compulsory Winding Up The Private Limited Company

The steps in compulsory winding up the private limited company are as follows –

  • Filing of petition
  • Petition followed by statement of affairs in form 4
  • Petition to be advertised for at least 14 days
  • Proceedings in the tribunal.
  1. Filing of petition – Petition will be filed by the following parties -
    1. Company
    2. Central government or state government
    3. Creditors of the company
    4. Registrar
    5. Any contributions or contributory of the company.
  2. Petition followed by statement of affairs – Petition should be accompanied with statement of affairs in form-4. All the documents filed under form-4 should be audited by the chartered accountant and auditor should give a qualified opinion regarding the financial statements.
  3. Advertise for at least 14 days – The petition should be advertised in the daily newspaper in both languages – English language as well as in regional language of the area. Form-6 is filed for advertisement purpose.
  4. Proceedings in the tribunal – Form-11 is needed in order to wind up the business and footnotes contain the prescribed duties –
    1. Submit the complete updated audited books of accounts
    2. Provide the date, place & time for the company liquidator
    3. Surrender the assets and its documents

Defunct Company Winding Up

STK-2 form is used to wind up defunct pvt. Ltd. company. Defunct companies are those companies where no financial transactions take place. It is also called dormant companies. In such case, only STK-2 form is filed and there is no further procedure to be followed.


Close Private Limited Company FAQ’S

The 4 ways by which private limited company business comes to an end are as follows –
  • Sell the company
  • Voluntary winding up
  • Compulsory winding up
  • Defunct company winding up
Defunct companies are those companies where no financial transactions take place. It is also called dormant companies. STK-2 form is used to wind up these types of companies.
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