How to Close a Private Limited Company?
Updated on July 08, 2024 10:41:08 AM
Starting a business comes with several challenges and at times when those challenges become unbearable, there arises a possibility to close the company. Same as the registration process, the winding up or closing a private limited company also involves various steps to be followed. In this blog we will discuss how to close a private limited company.
Given below is the list of steps to be followed to close a Private Limited(Pvt Ltd) Company in India:
Understanding Reasons of Company Closure
When considering closing a private limited company, it's crucial to evaluate the reasons behind this decision. Whether it's due to financial challenges, a change in business direction, retirement, or any other factor, understanding your motivations will help you navigate the process more effectively.
Closing a company can have legal and financial implications, so it's advisable to consult with professionals, such as lawyers and accountants, to ensure you make an informed decision. By taking this step, you can gain a clear understanding of the potential consequences and make strategic choices accordingly.
Board Meeting and Resolution
The decision of closing or winding up the private limited company must be taken mutually by all the board members. A special resolution regarding dissolution of the company must be taken and at the same time. Shareholders of the company must also be informed and their consent is also required.
Further decisions concerning the channelizing of assets and liabilities should also be discussed in the board meeting.
Appointment of a Liquidator
For the purpose of winding up a company, there is a requirement of appointing a liquidator, who will be responsible for taking charge of all the processes related to dissolution of a company
Liquidator is a person who is appointed by the company for the purpose of liquidation or winding up a company.
Filing of a petition
To close a private limited company, it is important to file a petition. The petition will be filed by the following:
- The Company
- The Trade Creditors of the Company
- Any contributory or Contributors to the company
- The Central or State Government
- By the Registrar of the Companies
The petition should be in Form WIN 1 or WIN 2 and it shall be accompanied by an affidavit in Form WIN 3.
Statement of Affairs
A statement of affairs must be drafted by the appointed liquidator mentioning all assets and liabilities on the date of starting winding up procedure. The detailed draft about the assets and liabilities is prepared by the liquidator who is appointed to liquidate the company.
Declaration of Solvency
Declaration of solvency is a document signed by the directors of the company. This document states that the company is solvent and is able to pay off all its debts. The declaration also mentions the time period within which all the dues and payments due to the creditors will be paid.
Report of Assets and Liabilities
A detailed report on the availability of total assets and liabilities of the company must also be prepared for the purpose of liquidation. In this report the total value of assets and liabilities should be mentioned. This will help in winding up the company and managing and channelizing all the assets and liabilities of the company.
Application to the Tribunal
After following all the processes mentioned above, it is important to submit the application for winding up the company to the Tribunal. The responsible person to carry out this function is the liquidator who is appointed to officially liquidate the company.
When closing a private limited company, there may be instances where the closure process involves legal complexities or disputes that require the involvement of a tribunal. A tribunal is a specialized judicial body that handles specific types of cases, including those related to company closures.
- It is the duty of the Tribunal to assess and audit all the books of accounts up to the date of the order.
- Provision of Date, Time, and place for the company liquidator.
- Surrender all the assets and accounts and submit them to the liquidator.
- The company liquidator shall submit the report to the Tribunal within 60 days of the winding up order.
- The company liquidator should forward a copy of the order to the registrar within 30 days of the date of the order.
Winding up the Company
After all the above mentioned processes the final step is the winding up of the company which can be done voluntarily or compulsorily. In case of compulsory winding up of a company, there is involvement of tribunal and courts. For the purpose of winding a company there is always a need for the liquidator.
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Conclusion
In conclusion, it must be asserted that the procedure of company closure of a private limited company involves various stakeholders. The process of closing a company or winding up a business includes several stages and processes to be followed.
Consult with Professional Utilities, for the purpose of winding up a company and get expert advice. Know the complete process of closing a company, and the stages involved in the procedure.
FAQs on Company Closure Process
What are the steps involved in closing a company?
The steps typically include holding a board meeting to pass a resolution for closure, informing stakeholders, settling liabilities, selling assets, filing dissolution documents with the relevant authorities, and eventually deregistering the company
What is a board resolution for company closure?
It is an official decision made by the company's board of directors to close the business. The resolution must be recorded in the minutes of a board meeting and should outline the reasons for closure and the proposed timeline.
Can I transfer ownership or sell my company instead of closing it?
Yes, you may explore selling the company as an alternative to closure. Transfer of ownership requires negotiations and legal processes to ensure a smooth transition.
What is the fee for strike off company?
The fee for striking off a company is ₹20,999 including government fee and professional fee of professional utilities. Close a company with us and follow all the compliances of company closure as per companies Act.
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