Close Private Limited Company
To avail our services, we charge 499/- as an advance or security payment.
Process to close Private Limited Company Online
LIQUIDATION OF THE COMPANY
When a company starts to wind up its business, the process of Liquidation begins. It can be any reason that the company has decided to stop with further operations like insolvency, Starting new Business or unwillingness to continue the business and many more. Liquidation of the company covers the ultimate settlement of the company assets.
To repay liabilities and settle debts, the company might have to sell its assets. And if in case the reason for liquidation is bankruptcy, the liquidator has to sell his assets to repay all pending liabilities. And if any kind of capital remains after repaying to the creditors, then the capital will be distributed among the shareholders of the company.
WAYS TO ClOSE PRIVATE LIMITED COMPANY
To close private limited company, it means to completely shut down all business transactions, operations, selling off all company assets to other people or entities, and to pay off company debts.
After clearing all the debts, the remaining capital or assets will be disturbed among the shareholders of the company based on the capital they have invested.
The wide up process takes place in two main possibilities,
- Compulsory winding up The compulsory winding up of a company can be performed by order of a court or by government, individual declaration presented by the directors during the company’s board meeting, which proposes a court interference. If any official person of the company files a petition in the court or a tribunal stating that the company is involved in any fraudulent/unlawful activities, it needs to be winded up compulsorily.
- Voluntarily winding up When all the Directors decide and pass a written resolution, to sell off all company assets or to transfer the shares to another entity.
ADVANTAGES OF WINDING UP A COMPANY?
Free from debts post liquidation: The company directors and officials are free from all the company liabilities as soon as the liquidation process gets completed.
Avoids legal action on the company: If the directors pass the resolution voluntarily, then it will neglect legal action taken by the court or the tribunal, and present a platform to company directors to focus on other business opportunities.
The low cost charged for liquidation: The cost or expenses included in the liquidation process is comparatively low, as charges will be applicable on the sale of assets.
All lease agreements will be canceled: If any company or entity has intruded into a contract for a prescribed time, during the liquidation process, in such case all the terms and conditions of the lease will be terminated. And If any penalty clause is mentioned in the lease, then it will be deducted from the sale of assets.
Advantages for creditors: The liquidation process will benefit the creditors as after an extended struggle they will be eligible for a default payment, concerning the declaration of credits given by all creditors.
What are the benefits of winding up a company?
Free from debts after liquidation: Once the liquidation process is over, the directors and all company officials are free from all creditor liabilities and pressure.
Avoiding legal action against the company:If the resolution is passed voluntarily by directors, they will neglect legal action taken by the court or the tribunal, and provide a platform to company directors to concentrate on other business opportunities.
Low cost for liquidation process: The cost or expenses involved in the liquidation process is relatively low, as charges will be applicable on the sale of assets.
All lease agreements will be cancelled: If any company or entity has entered into a lease for a prescribed time, during the liquidation process, it will terminate all the terms and conditions of the lease. If any penalty has to be paid, it will be deducted from the sale of assets.
Advantages for creditors: After a prolonged struggle, creditors will benefit from the liquidation process as they will be eligible for a default payment, with respect to the proposition of credits given by all creditors.
RULES TO FOLLOW FOR WINDING UP A COMPANY
- There should be an official Board meeting assembled for the approval to close private limited company.
- Written notice should be issued for gathering a general meeting to pass a resolution on the procedure to close private limited company.
- An official liquidator or insolvency professional should be appointed.
- The acknowledged towards the resolution passed at the meeting for voluntary winding up of the company should be done by the Income-Tax Department.
- Along with that, the No Objection Certificate (NOC) should be collected from the Income-tax department.
- There should be creditors meeting conducted to get approval from the creditors regarding the winding-up process if the creditors are in the majority of numbers. Given that creditors are owed 2/3rd of the company debts.
- Before initiating a wind-up process, an intimation should be conveyed to the Insolvency and Bankruptcy Board of India (IBBI) within seven days from the date of approval of the resolution.
- A public announcement in an official newspaper should be delivered within 14 days of passing the wind-up resolution. One in an English newspaper, and one in the local newspaper, where the registered company is located.
- Once the process of liquidation begins, the entire winding-up act should be completed within 12 months.
TWO TYPES OF VOLUNTARY WIND-UP
Voluntary Winding Up Of The Members.
If the directors and shareholders of the company voluntarily decide to wind-up the company, even though the company remains solvent (able to pay the debts) at the time of closure. It is termed as the Members’ Voluntary Winding Up. Such a declaration should contain the following characteristics-
- It needs to be verified by an affidavit.
- A complete data of the resolution passed by the company regarding the wind-up should be made and presented to the registrar within five weeks leading the date of the resolution.
- Along with the declaration, the latest an audited copy of the profit & loss statement of the company ( as on a practicable date before the announcement of solvency) should be accompanied.
- The declaration should be enclosed with the latest company balance sheet and a statement of assets & liabilities.
The given below steps need to be followed to carry out the process of Members’ Voluntary Winding Up.
- As mentioned above, the solvency declaration by the directors should be made.
- The legal declaration to the Registrar
- Appoint a liquidator
- All company assets should be collected, payment of its liabilities, and distribution of the balance of the capital among the contributors.
Voluntary Winding Up by the creditors
The company is considered to be insolvent if the directors do not prepare and submit the solvency declaration to the registrar. In that case, the creditors need to assemble (usually after the company general meeting)and pass the resolution to close private limited company and liquidation of the company.
To carry out the process of Creditors’ Voluntary Winding Up the mentioned below steps needs to be followed-
- The general meeting of the company needs to pass a resolution to close private limited company operations
- The creditors meeting needs to take place
- A liquidator or a group of liquidators should be appointed by the members and the creditors.
- There is a requirement to set up a committee of inspection as well.
- The process of winding-up starts as per the provisions of law.
PROCEDURE FOR VOLUNTARY WIND UP
- According to the companies act, 1961, the resolution of the board meeting is necessary to start the winding-up process.
- In a special resolution, a majority of 3/4th of the company shareholders need to register their votes in favor to close private limited company.
- Without any complications or disputes, the company’s creditors should approve the resolution made for winding up.
- The auditor report regarding the total company assets along with the outstanding debts should be enclosed with The “Declaration of Solvency” and needs to be forwarded to the RoC (Registrar of Companies).
- From the date of passing the resolution an official liquidator will be appointed to complete the winding-up process.
- The liquidator should open a bank account within one month once the resolution has been passed.
- The liquidator needs to open a bank account in the name with, the prefix “ the name of the company” followed by “voluntary liquidation”.
- Once all the reliable documents are collected, the liquidator will prepare a report containing final accounts and present that report in a general meeting for approval where the majority of members should pass this resolution.
- Once all the needed documents are gathered, the final report will be sent to the tribunal for reference.
- After analyzing the reliability of the report, the tribunal will pass judgment for the dissolution of the company.
- A copy of that decree will be forwarded to RoC by the liquidator within 30 days of the order dated.
- Soon the RoC will mandate to close private limited company, and remove the name of that company from the registry.
- The RoC will issue this order in the official gazette of India.
PROCEDURE FOR COMPULSORY WIND Up.
- The petition to the tribunal needs to be filed along with the statement of affairs of the disputed company.
- Once the credibility of the petition is scrutinized, the tribunal may accept or reject the filed petition.
- In this case, the tribunal itself will appoint the liquidator.
- The liquidator will administer all assets of the company, check the book of accounts, and gather into a draft/report.
- These reports are to be forwarded to the tribunal after the winding-up committee had received the same.
REQUIRED DOCUMENTS to close private limited company
The documents that are required to close the private limited company are;
- Authorized PAN card of the company
- The company’s bank account closure certificate.
- An indemnity bond, which needs to be notarized by the directors.
- Latest statement of company accounts.
- Statement of accounts audited by Chartered Accountant (CA) related to all assets and liabilities of the company.
- Proof of approval of the resolution by 3/4th of board members.
- Application for removing the name of the company.
FAQs on Close Your Private Limited Company
Yes, liquidation is important for the given below reasons-
- As soon as the liquidation process is completed, the directors and company officials are free from all creditor liabilities.
- The company can avoid legal actions from a court or tribunal. If in any case, the company directors pass a voluntary declaration.
- The cost included in the liquidation process is relatively cheaper than other modes of closure.
- It benefits the creditor as they will be qualified for default payment from the sale of assets.
Some of the most prominent causes for a company liquidation are-
- Unwillingness to continue the business.
The liquidation strategy leads to liquidating, which means selling the assets of a company before winding it up. By starting the liquidation process, the company may sell its assets to meet obligations and repay liabilities.
According to the liquidation strategy, a liquidator is appointed to manage the process of selling the company assets. After paying off to the creditors remaining capital gets distributed among the shareholders of the company.
No. A company is not allowed to carry any trading activities while undergoing liquidation, as the directors do not possess any control over their business affairs.
If the liquidator comes to know about any trading activity being initiated by the directors, he can start prosecution against the directors.
- The liquidator allows trading if it is towards repaying the creditors
- He will enable trading if it is for collecting the debts accrued by the business.
Why legaltoast ?
5 Stars Rated