Private Limited Company Closure Procedure

private limited company closure procedure.

The Registrar of Companies issues a Certificate of Incorporation upon incorporation of the Company, confirming its existence. Once a company’s name is entered into the register, it cannot be deleted until the company requests it through a voluntary striking-off process or it is done automatically as part of the Private Limited Company Closure Procedure. When a company fails to open for business or fails to file yearly returns, the registrar of companies has the authority to Suo moto strike off the company by delivering a notice to the company at its registered office address.

How to Close a Private Limited Company in India?

The removal of names of companies from the Register of Companies is covered by Sections 248–252 of the Companies Act of 2013 and the Companies (Removal of Names of Companies from the Register of Companies) Rules of 2016, which outline the Private Limited Company Closure Procedure in India. When compared to winding up, this option for removing the Company name from public records in India is much more affordable and is also a simple and hassle-free approach to close a Private Limited Company in India and end operations.

If we interpret the term ‘strike-off’ actually, we would say that it refers to deleting the company’s name from the Register of Companies kept by the Registrar of Companies through the Private Limited Company Closure Procedure to close Pvt Ltd Company in India. It is more similar to the company being closed down because, after being Struck Off using the Private Limited Company Closure Procedure to close Pvt Ltd Company in India, the company will no longer exist and will be unable to carry out any further operations

Reason for Closure of Company under Companies Act 2013

The Main Reason for Closure of Company under Companies Act 2013 is that it has to comply with numerous regulations, including the regular filing of Income Tax and Annual Returns and the appointment of an Auditor, among others. If there is non-compliance, the Company may be subject to fines or the Directors may lose their positions. Considering these as a reason for company closure, it is wise to shut down the company.

In addition to bankruptcy, a number of other factors might cause a Private Limited Company to close. From internal to external influences, the causes can vary. In order to maintain its status as a legal organization, the Company must pay a significant amount on annual pending compliances and standard Audit files if it fails to properly follow Procedure to Close Pvt Ltd Company for Pvt Ltd Company Closure

Company Closure Requirements

Following are the Requirements for Closure of Pvt Ltd Company –

  • Company hasn’t started doing business within a year of incorporation,
  • It hasn’t done any business in the previous two financial years and hasn’t applied for the designation of “dormant company” under Section 455 of the Act.
  • The memorandum’s subscribers have made the required subscription payments, and a declaration to that effect has been submitted within 180 days after the document’s incorporation. (INC-20A)
  • Company with no assets or liabilities.

Until these Company Closure Requirements are met, Pvt Ltd Company Closure is not possible as this is the part of private limited company closure procedure.

Companies that are not eligible for strike off include:

According to the Companies Law, a Company is ineligible for strike off in the following situations:

  • The Company was formed after November 2nd, 2018, but INC-20A has been filed.
  • It has not been one year since incorporation.
  • For a continuing business, meaning one that has had transactions within the last two years.
  • DIN is deactivated.
  • Any director is disqualified.
  • Any current litigation has not yet been resolved; 
  • The company has already received notice from ROC that it has been struck off.

Documents for Closure of Company in MCA

Following are the documents required for closure of company –

  • Acceptance by the Company’s Creditors
  • A valid indemnity bond (in Form STK 3) signed by each director
  • A Chartered Accountant-certified statement of liabilities listing all assets and liabilities of the companies
  • A Form STK 4 affidavit signed by each company director
  • CTC of Special Resolution, officially executed by all of the company’s directors
  • The Directors’ electronic signature
  • Directors’ Aadhaar and PAN cards
  • Director’s Affidavit and Letter of Consent

Company Closure Process

Following are the Procedures to Close Pvt Ltd Company –

  • Hold a board meeting to discuss and decide on a voluntary strike off in accordance with section 248(2)
  • Pay off all debts before the EGM is held.
  • Call a special EGM to pass a resolution.
  • Within 30 days, submit a special resolution in MGT-14.
  • Submit the following documents with the Company Closure Form STK-2:
    • A statement of accounts in form STK-8 with the company’s assets and liabilities made up for a day, not more than 30 days prior to the date of application, and certified by a Chartered Accountant; 
    • An indemnity bond in Form STK 3 that has been properly notarized by each director;
    • Every director of the company must sign an affidavit in Form STK 4;
    • CTC of Special Resolution, properly executed by each Director An additional requirement is the permission of any other authority that may be responsible for regulating the Company;
    • Declaration regarding any legal actions that the company is currently involved in;
  • Following receipt of an application, the ROC must publish a public notice STK-6 to solicit public input on the proposed strike-off; 
  • The notice must be posted on the Ministry of Corporate Affairs website, published in the Official Gazette, and published in at least one local newspaper in the local vernacular as well as a top English publication.
  • ROC must simultaneously notify the CBDT and CBEC, who have authority over the company, about the intended action of removing or striking off the names of those companies. It must also request any objections.  
  • Once all procedure to close pvt ltd company have been followed, the ROC must remove the company’s name and dissolve it by publishing a notice in the official gazette in the STK-7 form.

Exceptions to the Rule under Section 248(2)

The companies that apply for voluntary strike-off under section 248(2) of the Companies Act, 2013 are restricted if, within the last three months, the company:

  • Has changed its name or moved its registered office from one State to another; 
  • Has made a disposal for value of property or rights held by it immediately prior to ceasing to engage in trade or other business, for the purpose of disposal for gain in the normal course of business; or otherwise has made a disposal for value of property or rights held by it.
  • Has engaged in any action other than what is required or advantageous for the purposes of making an application under that section, considering whether to do so, ending the company’s affairs, or meeting any legislative requirement.
  • Has filed an application to the Tribunal for the sanctioning of a compromise or agreement, and the matter has not yet reached a final resolution
  • Or is now being wound up under Chapter XX, whether voluntarily or at the request of the Tribunal or in accordance with the IBC, 2016.

Companies that are unable to voluntarily strike off under Section 248(2)

  • Listed companies
  • Companies that have been delisted because they didn’t follow the listing agreement or regulations, or any other legislative laws
  • Companies, where an inspection or investigation has been ordered, is being carried out, or steps have been made in response to the order but are still pending in court due to prosecutions resulting from the inspection or investigation
  • Companies where notices under Section 234 of the Companies Act, 1956 (1 of 1956), Section 206, or Section 207 of the Act have been issued by the Registrar or Inspector and a response to those notices is pending, Section 208 report has not yet been submitted, Section 208 report instructions have not yet been followed up on, or Section 234 prosecution resulting from such inquiry or scrutiny, if any, is pending with the Court.
  • Companies for which a court is now pursuing criminal charges.
  • Companies that have a pending application for compounding with the appropriate authority for the offenses committed by the company or any of its defaulting executives.
  • Companies that have accepted public deposits that are either still owed or for which the company is in default

Frequently Asked Questions (FAQ)

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