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Closing your Private Limited Company
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 –
- Sell the company
- Voluntary winding up
- Compulsory winding up
- Defunct company winding up
Sell The Company
One way of voluntarily winding up the company is selling the company i.e. Selling shares of the company to some other party. A company can be sold by selling the majority of shares of the company to any other party. Although it is technically not a winding up, the stakes are transferred to another person or entity and the majority shareholders are released from their stocks and responsibilities.
The list of Documents Required for Company Closure
What are the reasons for closing a private limited company?
Members and creditors of the company may apply for the company's closure for the following reasons:
- If the ROC finds that the company has engaged in any fraudulent or unethical conduct.
- If the company has been failed to file financial statements for the last five years.
- If a company is unable to pay its creditors.
- If the management of the Company is gridlock and there is no prospect of winding up.
Voluntary Winding Up
The Voluntary winding up of a private limited company is a long procedure. Voluntary winding up of a company means winding up of a company by its members voluntarily. Winding up of a company can be done voluntarily by the members, if –
Procedure Of Voluntarily Winding Up Of Private Limited Company
The procedure of voluntarily winding up of a private limited company is as follows –
- 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 the company’s assets.
- Step 2 – In the second step, the company issues a written notice to call a general meeting along with an explanatory statement proposing the resolution.
- Step 3 – In the third step, the company passes the ordinary resolution in the general meeting for the purpose of winding up by the ordinary majority or 3/4th of the majority by passing the special resolution.
- Step 4 – After passing the special resolution in the third step, conduct a meeting of creditors. If the majority of the creditors are having the same opinion that winding up of a company is beneficial for all the parties, the company will be winded voluntarily.
- 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 the passing the resolution.
- Step 6 – In the sixth step, the company has to give notice of the resolution in the official gazette and also advertise the same in the newspaper within 14 days after the passing of the resolution.
- Step 7 – In the 7th step, the company must file certified copies of resolutions (ordinary or special) passed within 30 days of the general meeting.
- Step 8 – In the 8th step, wind up the affairs of the company, prepare the liquidator account, and auditors will audit the same.
- Step 9 – In the 9th step, the company conducts a general meeting.
- Step 10 – In the 10th step, the company passes a special resolution in the general meeting to dispose of books and all other necessary documents after winding up the company's affairs.
- Step 11 – In the 11th step, the company submits an account copy as well as an application to the tribunal within 15 days of the first general meeting to pass an order for dissolution.
- Step 12 – In the 12th step, If a tribunal found that all your accounts are in order and the company has followed all the necessary compliance's, the tribunal will pass the order for dissolving the company within 60 days of receiving the application.
- Step 13 – The appointed liquidator submits a copy of the order with the registrar in step - 13.
- Step 14 – In step – 14, the registrar publish a notice on the official gazette declaring that the company is dissolved after receiving the order passed by the tribunal.
Compulsory Winding Up
According to the companies act 2013, a company has done any fraudulent or illegal activity or involvement in any unlawful or illegal act. The company will be mandatory wind up by the tribunal.
Filing of a petition
The petition will be filed by the following:
The petition should be submitted in triplicate in Form WIN 1 or WIN 2. A petition shall be accompanied by an affidavit prepared in accordance with Form WIN 3.
Procedure For Compulsory Winding Up The Private Limited Company
The steps in compulsory winding up the private limited company are as follows –
Defunct Pvt. Ltd. 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. The form STK-2 needs to be filled with the Registrar of Companies, and the same needs to be duly signed by the director of the company authorized by its board to do so.
For the purpose of this scheme, a defunct company refers to a company that has:
Close Private Limited Company FAQ’S
- Reduces annual compliance costs.
- There is no risk of non-compliance.
- There is no chance of hefty fines and prosecutions.
- No risk of getting into default.
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