Stepwise process to close a private limited company
- Owning and operating a company brings its own set of challenges.
- Occasionally, when things don't go in the right direction, a company might have to close.
- There may be numerous causes for the company to close.
- Below mentioned are some options for closing a private limited company
SELLING OF THE COMPANY
- Selling a Private Limited Company is also considered voluntary liquidation.
- This can be accomplished by selling company's stocks.
- In such a process, the stakes are moved to another person or company, and the majority shareholders are liberated from their stocks and responsibilities, despite the fact that it is not a formal winding up.
Compulsory Winding Up
- Any registered company operating in India under the Companies Act committed an unlawful act, a corrupt act, or even participated in some fraudulent or criminal activity would be forced to close down by the Tribunal.
- The following stages are involved in compulsory winding up:
- Filing of the petition by one of the following
- The Company itself
- Company's Trade Creditors
- Company's contributory or Contributors
- Any or all of the three categories stated above
- The Government of India or the state government
- By the ROC: The petition should be filed in triplicate on Form WIN 1 or WIN 2. The petition should be supported by an affidavit prepared in accordance with Form WIN 3.
Company's Statement of Affairs
- All papers/documents accompanying the petition should be duly audited by a licenced CA.
- The auditor's assessment of the company's financial statements has to be unqualified.
- The statement of affairs must be made in duplicate on Form WIN 4, and it should be supported by an affidavit on Form WIN 5.
Minimum 14 day's advertisement
- It is mandatory to advertise the petition in a daily journal for a minimum of 14 days in both the regional language of the area and English.
- The advertisement should be conducted in accordance with Form 6.
- The Tribunal will hold a hearing on the petition on the scheduled day and will take objections and responses from both the petitioner and respondent.
- A temporary liquidator may be appointed by the Tribunal.
- Form WIN 8 must be used to appoint a provisional liquidator.
- Form WIN 11 should be used to establish the order of winding up.
- The process for winding up must be as follows:
- The responsibility to produce audited books of accounts till the date of the order.
- Indicate the date, time, and location of the Company Liquidator's appointment.
- Submit the Company's assets and related papers to the liquidator.
- Upon receipt of a winding-up order, the Company liquidator shall seize all of the company's property and effects, actionable claims, and all the relevant documents.
- Within 60 days of the date of the winding-up order, it is obligatory that the Company's liquidator shall submit a report to the Tribunal.
- After the company's affairs have been properly wound up, the Company Liquidator shall apply to the Tribunal for the company's dissolution.
- If the tribunal determines that it is just and reasonable in the circumstances of the case to issue an order for the company's dissolution, make an official order for the company's dissolution effective on the date of the order.
- The company will be dissolved in accordance with these provisions.
- The Company liquidator must provide a copy of the order to the registrar within 30 days of the date of the order.
If the tribunal determines that things are in order and that all compliance requirements are met, the tribunal will issue an order for the dissolution of the company within 60 days of receiving the application.
Following the tribunal's decision, the registrar will publish a notice to the Official Gazette indicating that the company has been officially dissolved.
Voluntary Winding Up
The following stages are involved in voluntary winding up:
- The company officially adopts a resolution in its general meeting following the expiration of the term for which it was founded or if any such event occurs on which the company's articles permit its dissolution.
- The permission of the Trade Creditors is also necessary to wind up the company. Trade creditors must agree that they will have no obligation if the company is wound up.
- The company must issue a Declaration of Solvency, which must be duly recognised by the company's trade creditors.
- The Company must establish its legitimacy/ credibility in the Declaration of Solvency.
Winding Up a Defunct Company
According to the Companies Act of 2013, a Defunct company is such a company that has been designated as a Dormant Company. Because inactive companies do not engage in financial dealings, the government gives some assistance to such deceased or dormant companies.
The Companies Act of 2013 established the method for dissolving a defunct company. A Defunct Company may be wound up using a fast-track procedure that involves the filing of the STK-2 form.
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