Closure of Company in India: Methods, Stepwise Process & Legal Considerations

A While often used interchangeably, there are distinctions:
Closure (Striking Off): A simpler, faster process for defunct companies that haven't carried on any business or operations for a certain period or have failed to commence business within a year of incorporation. The company's name is simply struck off the register.
Winding Up: A more formal and complex process for solvent or insolvent companies, involving the liquidation of assets, payment of liabilities, and eventual dissolution of the company.
Winding up generally involves a liquidator and is overseen by the National Company Law Tribunal (NCLT), while closure (striking off) is handled by the Registrar of Companies (ROC).

A Reasons for closure or winding up include:
• Business failure or lack of profitability.
• Completion of a specific project or objective.
• Merger or acquisition with another company.
• Shareholder disputes or disagreements.
• Non-compliance with legal requirements.

A A company can be struck off if it:
• Has failed to commence its business within one year of its incorporation.
• Has not carried on any business or operation for two immediately preceding financial years and has not made any application within such period for obtaining dormant status under section 455.
• The subscribers to the memorandum have not paid the subscription amount and the declaration to this effect has not been filed within 180 days of its incorporation.
• The company has failed to obtain a commencement of business certificate within one year of its incorporation.
• The directors have not made any declaration within 180 days of its incorporation that every subscriber to the memorandum has paid the value of shares agreed to be taken by him.

A The process generally involves:
• Passing a resolution for striking off at a board meeting.
• Filing an application with the Registrar of Companies (ROC) in Form STK-2.
• Submitting the required documents and paying the prescribed fees.
• The ROC verifies the application and, if approved, strikes the company's name off the register.

A Documents typically include:
• Application in Form STK-2.
• Board resolution.
• Affidavit from directors.
• No Objection Certificate (NOC) from relevant authorities (if required).
• Auditor's certificate.

A There are two main types of winding up:
• Voluntary Winding Up: Initiated by the company itself through a special resolution.
• Compulsory Winding Up: Ordered by the National Company Law Tribunal (NCLT) on a petition filed by creditors, contributories, or other parties.

A The process generally involves:
• Passing a special resolution for winding up at a shareholders' meeting.
• Appointing a liquidator.
• Liquidating the company's assets.
• Paying off creditors.
• Distributing any remaining funds to shareholders.
• Filing the final return with the ROC for dissolution.

A The process generally involves:
• Filing a petition with the NCLT.
• The NCLT hearing the petition and, if deemed fit, ordering the winding up.
• Appointing a liquidator (often an official liquidator).
• Liquidating the company's assets.
• Paying off creditors.
• Distributing any remaining funds to shareholders.
• The NCLT passing an order for dissolution.

A Grounds for compulsory winding up include:
• Inability to pay debts.
• Default in filing annual returns or financial statements.
• Oppression of minority shareholders.
• Where the company has acted against the interest of the State or general public.
• Just and equitable grounds.

A Fees are prescribed by the MCA and the NCLT and are subject to change.

A The process can take several months to years, depending on the complexity of the case.

A After dissolution, the company ceases to exist legally, and its assets and liabilities are dealt with as per the winding-up process.

A Directors' powers cease, and they may have certain liabilities. Shareholders receive any remaining assets after creditors are paid.

A You can check the status of a company on the MCA website.

A The liquidator manages the company's assets, pays off creditors, and distributes remaining funds to shareholders.

A The bank accounts are usually frozen and dealt with by the liquidator.

A Consult a tax professional for specific advice or reach out to us on email: info@returnfilings.com or on whatsapp: https://wa.me/919910123091.

A Ensure timely compliance with all legal requirements and manage the business effectively.

A Non-compliance can lead to penalties and legal issues.

A Revival after final dissolution is generally not possible.

A Members' voluntary winding up is for solvent companies, while creditors' voluntary winding up is for insolvent companies.

A The NCLT oversees the winding-up process and passes orders related to it.

A You should consult with any professional specializing in corporate law or reach out to us on email: info@returnfilings.com or on whatsapp: https://wa.me/919910123091.