Winding up a private limited company is possible in a couple of ways in India. A closure is enforced when the business entity fails to comply with plenty of necessary compliances. So, if a company is not able to carry out its business operations for a considerable period of time and does not expect it to revive shortly, then it is better to close that firm and avoid penalties resulting from non-compliance.
What are the Different Ways of Winding Up a Private Limited Company
There are a variety of procedures for winding up a Pvt Ltd company.
1) Compulsory winding up of a company
2) Voluntary Winding Up of a Company
3. Fast Track Exit Scheme (FTE)
1) Compulsory Winding Up of a Company
Tribunal is completely responsible for this sort of closing up. Some of the key reasons for the same are listed below.
Unpaid debts of company
Unlawful act by a company or the company's management
A special resolution passed for closing up
Default in filing a yearly return or financial statements with the ROC or the registrar of companies for five consecutive years.
Tribunal is of the view that the company must close up. Some of the key steps that are involved in closing up a private limited company in India by tribunal:
Step 1: The company owner must file a petition to the tribunal and affix the company's statement of affairs along with that.
Step 2: The tribunal will either accept or reject it in receiving the application for closing and petition. Thereby. Pass an order within 90 days from the date of petitions receipt.
Step 3: If someone files the petition other than the company, the tribunal has the authority to dismiss the application.
Step 4: If the tribunal thinks that your company must go for closing up after an extensive assessment, then it must pass an order to you to file the objection with a statement of affairs within 40 days.
Step 5: Now, the tribunal will appoint a liquidator to carry out the closing process of your company. He or she will take his or her course of action, so examine the books of accounts, review the sale of assets and do other financial functions. The liquidator will prepare a draft report for the approval of the closing up committee.
Step.6: The liquidator will submit its final report to the tribunal to pass an order of closing up the company once the committee approves the draft report.
Step 7: The liquidator will forward a copy of the order to the ROC within 30 days. If he or she fails to do so, then it will lead to a big penalty.
Step 8: The ROC will approve the winding up of the company after complete satisfaction. The registrar will strike the name of the company from the ROC and send a notice in the official gazette of India for publication.
2) Voluntary Winding Up of a Company
It happens under two circumstances-1) Company passes a resolution in general meeting after expiry of duration for which it is formed or on when an event mentioned in AOA (Articles of Association) happens. 2) Company passes special resolution for voluntary closing up of the company.
Here are some key steps involved in private limited company winding up process:
The company passes a resolution in the general meeting and majority of directors agree for the closing up.
If the company gets closed up, consent of trade creditors approving that they don't have any obligation.
The private business entity makes a declaration of solvency that shows the credibility of the company. It should be accepted by the trade creditors of the firm.
Appointment of the liquidator to carry out the closing up preceding and prepare a report of the closing up on the assets, debts, properties and so on, be laid out prior to the general meeting of the company. The report is approved and resolution for dissolution of the company is passed in the general meetings.
Also, a copy of the final accounts of the company and resolution is sent to ROC by the company liquidator.
The liquidator of the company spies to the tribunal for an order of dissolution of the company. The tribunal will pass an order of dissolution within 60 days of the Application if satisfied with the closing up. The copy of the final order to be filled with the ROC. The closing of a private limited company is a multi-staged process and needs expert guidance. If you need legal competence in carrying out the closing procedure of the company, you must look no further than ExpertBells. They provide end to end assistance in winding up your business operations and complete the whole process with 90 working days.
3. Fast Track Exit Scheme (FTE)
This is a fast process to close a company without adopting a lengthy procedure by passing a special resolution and applying to the high court and appointing a liquidator and so on. Also, it is a very expensive process that can't be affordable to small businesses and organizations.
Procedure for Compulsory Winding up of a Company
The application procedure to get the name of a company struck off under fast track exit is listed below.
Registration: Company eligible to apply for closing off its name has to apply to the ROC in form FTE.
The FTE has to be filed electronically on the ministry of corporate affairs website by permitting ROC fee of Rs 5000.
The ROC examines and provides notice to the company under section 560 )3) of the companies act, 1956 by email, mentioning 30 days unless the cause of showing to the contrary, its name be struck off from the registrar and the company will be dissolved.
The ROC includes the name of the applicants and the date of making the application under the scheme in the ministry of corporate affairs website and providing 30 days to raise objections if any by the stakeholders to the concerned registrar.
The ROC sends intimation of such companies that avails FTE mode to the office of the income tax department providing 30 days for their objection.
The ROC approves if satisfied and strikes its name off the register and sends a notice under section 560 of the companies act, 2956 for publication in the official gazette.
What Documents are Required?
The documents to file an application with a prescribed fee of Rs 5000 are mentioned below.
An affidavit
Copy of board resolution
Indemnity bond
Prerequisite
Statement of account
If you need any help related to company winding up, private limited company registration in India, etc, contact ExpertBells right now.
Kindly visit our other blogs to find step-by-step information on company registration online or Conversion of Private Limited Company into Public Limited Company.