Updated on July 06, 2024 11:46:22 PM
A private limited company receives a certificate of incorporation from the ministry of corporate affairs after successful registration of business with the government. Once a company name is entered into the records of the government, it can only be deleted by initiating the process of voluntary strike off a company name from the registry. The process of strike off a company name can be automatically initiated when a company fails to operate business, unable to file yearly returns and compliances. The registrar of companies has the authority to Suo moto strike off the company by sending an official notice to the company.
The removal of names of companies from the Register of Companies is covered under 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 highlights the Private Limited Company Closure Procedure in India.
The closure of a private limited company involves winding down its operations, settling its debts and liabilities, distributing its assets, and deregistering with the Ministry of Corporate Affairs (MCA). This process is typically initiated when the company is unable to fulfill its objectives, faces financial difficulties, undergoes organizational changes, or merges with another entity. The PVT LTD company closure process involves several steps, including convening a general meeting, appointing a liquidator, settling debts and liabilities, distributing assets, filing a closure application, and obtaining a closure certificate.
The detailed process of winding up or closure of a private limited company is as follows:
The first step in the closure of a private limited company is to convene a General meeting. The company's board of directors must call a Special General Meeting (SGM) of the company's shareholders to specifically address the matter of winding up the private limited company. This meeting serves as a formal platform for the shareholders to consider the proposal for closure and make an informed decision. The notice of the SGM must be sent to all shareholders of the company at least 14 days before the date of the meeting.
The company's shareholders or the court have the authority to appoint a qualified individual to serve as a liquidator, entrusted with overseeing the winding-up process. This appointment ensures that a responsible and competent person is responsible for managing the company's assets, settling debts, and ensuring a smooth transition to closure. The liquidator's duties encompass a wide range of responsibilities, including taking possession of the company's assets, realizing the assets by converting them into cash, paying off the company's debts, and distributing the remaining assets among the company's shareholders in accordance with their respective interests.
The liquidator must diligently identify, verify, and list all outstanding debts and liabilities of the company. This involves a thorough examination of financial records, communication with creditors, and ensuring that all financial obligations are identified and accounted for. The liquidator has a responsibility to notify all creditors of the company's winding up and invite them to submit their claims within a specified time frame.
The liquidator must obtain a valuation of the company's assets by a qualified valuer. This valuation provides an accurate assessment of the company's financial worth and ensures that the assets are distributed fairly among the shareholders. After settling debts and liabilities, the liquidator should distribute any remaining assets among the company's shareholders according to their respective interests. The liquidator must follow a structured procedure for distributing assets, ensuring that each shareholder receives their rightful share.
The liquidator must file Form INC-20 with the Ministry of Corporate Affairs (MCA) to deregister the company and initiate the formal closure process of the private limited company. This form serves as the official notification to the MCA of the company's intention to close and triggers the process of deregistration. The MCA will thoroughly review the closure application and supporting documents to verify compliance with all requirements.
Upon successful completion of the winding-up process and verification of compliance with all requirements, the MCA will issue a closure certificate, officially marking the end of the private limited company's existence. This certificate serves as formal documentation of the company's closure and provides legal recognition of its dissolution. The liquidator must retain all records related to the winding-up process for a period of at least eight years from the date of issue of the closure certificate. This retention ensures that the company's financial and legal records are preserved for future reference, audits, or potential legal inquiries.
Here is the list of documents required forClosure of Private Limited Company are:
The total cost of private limited company closure is ₹ which includes government fee and professional filing fee of Professional Utilities.
| Section 8 Company Closure | Fees |
|---|---|
| Government Fee | ₹ |
| Professional Fee | ₹ |
| Total Fee | ₹ |
Note: The aformentioned Fees is exclusive of GST.
Note: For the purpose of company closure a professional fee is charged by the company secretary, and an additional fee for Documents Processing and auditing(Notary and Stamp Paper).
There are a number of reasons why a Section 8 company might choose to close or strike off. These reasons can be broadly classified into three categories:
At Professional Utilities, we leverage our industry knowledge and expertise to help businesses navigate complex regulations, minimize risks, and optimize operations for maximum efficiency and profitability.
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In conclusion, the process of private limited company closure in India is a complex and multifaceted one. There are a number of factors to consider, and it is important to seek professional advice to ensure that the process is carried out correctly and in compliance with all applicable laws and regulations issued by the Ministry of Corporate Affairs.
The two main methods of company closure are voluntary winding up and compulsory winding up. Voluntary winding up is initiated by the company's shareholders or directors, while compulsory winding up is initiated by a court order. The steps involved in each process vary, but both ultimately result in the dissolution of the company and its removal from the register of companies.
Consult with Professional Utilities for more information on Company closure or liquidation and get the expert advice on your section 8 company closure to avoid any penalty.
Voluntary winding up is a process that is initiated by the company's shareholders or directors, while compulsory winding up is initiated by a court order. Voluntary winding up is typically used when the company is solvent and the shareholders or directors believe that it is in the best interests of the company to close down. Compulsory winding up is typically used when the company is insolvent and there are no reasonable prospects of it being able to pay off its debts.
The time it takes to close down a private limited company will vary depending on the complexity of the process. In general, voluntary winding up can take anywhere from 3 to 12 months to complete, while compulsory winding up can take anywhere from 6 to 18 months to complete.
The costs of closing down a private limited company will vary depending on the company's size and complexity. However, the cost of private limited company closure is ₹21,999 with Professional Utilities.
Yes, in both voluntary winding up and compulsory winding up, a liquidator must be appointed to oversee the winding-up process. The liquidator is responsible for realizing the company's assets, paying off its debts, and distributing any remaining assets to the shareholders or creditors.
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