A One Person Company (OPC) is incorporated under the Companies Act, 2013 and registered with the Registrar of Companies (ROC). While OPCs enjoy several benefits, there may be circumstances where an OPC needs to be closed. This guide provides an in-depth understanding of the process, requirements, and procedures for winding up or striking off an OPC in India.
Several circumstances can lead to the closure of an OPC. The most common reasons include:
An OPC may be incorporated with a specific business objective but may not start operations due to unforeseen circumstances. If an OPC remains inactive for a significant period (e.g., one year), it may opt for closure.
Some OPCs are created for specific projects or objectives. Once the objective is fulfilled, and no further operations are required, the company may be closed.
If an OPC incurs continuous losses and its business is no longer viable, the owner may decide to close the company to avoid additional financial liabilities.
Since an OPC is run by a single individual, its continuity depends on the director. If the sole director passes away, the nominee may choose to wind up the company.
An OPC that becomes insolvent or unable to meet its financial obligations may be subject to compulsory winding up by a tribunal or voluntary closure.
Failure to comply with the provisions of the Companies Act, such as annual filings, tax returns, and other regulatory obligations, may result in penalties, disqualification of directors, or even strike-off initiated by the ROC.
If an OPC engages in activities against the sovereignty and integrity of India, state security, or fraudulent practices, it may face forced closure by regulatory authorities.
There are two primary ways to close an OPC:
The sole director of the OPC may voluntarily apply for the closure of the company by submitting an application for strike-off to the ROC.
A competent court or tribunal may order the winding up of an OPC due to insolvency, non-compliance, fraudulent activities, or any other justified reason.
The process of voluntarily closing an OPC involves the following steps:
The sole director must pass a resolution approving the strike-off process and obtain consent from the nominee director.
Before applying for strike-off, the OPC must clear all outstanding liabilities, including taxes, loans, and any statutory dues.
The OPC must file Form STK-2 with the ROC, along with the following documents:
• Copy of board resolution authorizing the strike-off
• Affidavit and indemnity bond from the director
• Statement of accounts (not older than 30 days)
• Income tax return acknowledgment
The ROC will review the application and, if satisfied, publish a public notice (STK-7) inviting objections. If no objections are received within 30 days, the company’s name will be struck off from the Register of Companies. Key points to note here is finalization of books of accounts before filing application in form STK-2 and filing of audited financials till the date of closure is required by ROC to finally close the OPC. Further declaration from the director / shareholder is required pertaining to no dues and liability is pending on behalf of OPC.
In cases where an OPC faces insolvency, fraud charges, or regulatory non-compliance, a tribunal may order its winding up. The steps involved are:
A petition is filed before the National Company Law Tribunal (NCLT) by creditors, regulatory authorities, or the government.
If the tribunal finds merit in the petition, it appoints a liquidator to manage the closure process, including settling liabilities and disposing of assets.
The liquidator sells off company assets, settles outstanding debts, and distributes any remaining funds among stakeholders. Here the books of account will be accessed and reviewed by the Liquidator and if liquidator deems fit, may call for meeting with creditors / lender / debtors of the Company.
Upon completion of the liquidation process, the NCLT issues an order for the company’s dissolution, and its name is removed from the Register of Companies.
Once an OPC is struck off:
• The company ceases to exist as a legal entity.
• It cannot enter into contracts or undertake business transactions.
• The director is relieved of compliance obligations but remains liable for past fraudulent activities (if any).
• Ensure all tax liabilities and statutory dues are cleared.
• Inform stakeholders, including clients and suppliers, about the closure.
• File all pending compliance documents to avoid penalties.
Closing an OPC requires a systematic approach to ensure compliance with legal and regulatory requirements. Whether opting for voluntary closure or facing compulsory winding up, it is essential to follow the proper procedure to avoid legal consequences. Seeking professional guidance can simplify the process and ensure a smooth transition.
For professional assistance, reach out to us on email: info@returnfilings.com or on whatsapp: https://wa.me/919910123091 to ensure all statutory obligations are met on time.
