Procedure to Close a Private Limited Company (Closure)
Being a business owner is not easy since there are many underlying difficulties. A stretch of unsuccessful years seldom forces enterprises to shut down and choose to close a private limited company.
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Close a Private Limited Company in India
The process of closing a private limited company is known as strike off or company closure. Company closure is done under the newly notified companies (Removal of Names of Companies) rules, 2016 which are governed by section 248 of the Companies Act, 2013. If you are not running your company, we recommend you close your Private Limited Company (PLC).
The company is a perpetual entity and cannot be dissolved by any outside force. It is created by law and in order to close it down, one must follow the given process laid out by law. Closing a private limited company in India can be done in numerous ways, but out of all of them, applying for striking off is the least time-consuming.
After all the compliance measures have been met, it is possible to remove the company’s name. The registrar eliminates the company’s name from the register of companies after receiving consent to strike out the name, at which point the company ends.
Pvt Ltd Company Closure Process
There are different viable ways of closing a Pvt Ltd company such as compulsory winding up and voluntary winding up. Our professionals carry years of experience and have aided numerous clients in closing a pvt ltd company. For better understanding, checkout the quick and easy pvt ltd company closure process outlined below.
Step 1
The initial step is to fill in the required details asked in the pvt ltd company closure form and submit the documents.
Step 2
The affidavit for company closure and other relevant documents will be drafted by our professionals and submitted for your signature.
Step 3
We’ll submit your most recent statement of accounts certified by a CA along with the closure application to the MCA.
Step 4
Once ROC approves the application, The Pvt. Ltd. business can be closed lawfully.
Learn more about the closure of a private limited company
Not every business idea is implemented in the same manner it was thought of, due to some reasons as things don’t work out the way you wanted and that’s why you might think to close a private limited company.
Closing a private limited company isn’t an easy thing, and it’s important to adhere to all laws and regulations when doing so. One of the ways to voluntarily cease business is by liquidating your investment, but there are other legal methods as well. In this, we’ll go over how one might voluntarily close their private limited company.
The process of closing a private limited company is not straightforward. You have to abide by governmental laws and regulations including filing your final accounts, paying your outstanding taxes and submitting documents.
Different ways of closing a private limited company
Closure of the company by ROC by declaring it as defunct
When a company is inactive for two years or more, it can be easy to forget about it. However, the easiest way to handle this situation is by lodging an application in Form STK-2 if it has been inactive for over two years or if no business has been started since incorporation. These applications are filed with the registrar of the company.
Voluntary Wind Up of the Company
With the approval of ¾ of shareholders, a company’s board of directors or management can apply to NCLT for the voluntary wind up. This is the process where all financial difficulties and frauds are addressed by an insolvency professional who will recommend an appropriate dissolution strategy and asset liquidation plan that honors all legal claims. All matters considered, on the recommendation of the IRP, NCLT passes the order for winding down operations and dissolves the company.
Compulsory Wind Up of a Company By NCLT
According to the law, voluntary or compulsory liquidation of company can be initiated by an application made by creditors, or by a notice for compulsory winding-up given by the central government or ROC. The official liquidator is appointed after passing a resolution for its winding up. After that, the assets and liabilities are valued at the time of winding-up and a report is presented in equal shares monthly. After that, NCLT sanctions the liquidation order.
Documents required for the Closure of a Private Limited Company
- Every ITR and return submitted to the ROC
- Board decision authorizing the closure
- Statements made by each director
- Bond of Indemnity from each director
- 75% of shareholders must agree.
- Statement of closure for a Bank
- Certified accounting statement certified by CA
- Proof of partners’ identities and current addresses
Why choose JustStart for Private Limited Company Closure?
At JustStart, we pride ourselves on being a fully automated and tech enabled portal for companies incorporation and its compliance management. We have a team of legal professionals with years of experience behind us, and we use our tech capabilities to execute all legal work for our valuable clients.
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What are the benefits of the closure of a private limited company?
The closure of a company is the best thing to do when a company isn’t running properly or not generating revenue. The closure of a private limited company would be beneficial in the following ways:
- Reduces the annual compliance expense.
- No danger of noncompliance.
- No possibility of severe sanctions or legal action.
- There is no chance of foreclosure.
What is the time limit to file the closure documents with the Registrar?
Within 30 days after the day the assets and liabilities statement were signed, the closing paperwork must be submitted.
What is the time duration expected to close a private limited company?
It usually takes 90 days after submitting the application to the Ministry of Corporate Affairs for the company to be removed from MCA records.
What happens to assets when you close a limited company?
You are not permitted to trade or undertake any commercial operations via that limited company once your company has been shut off. Any assets still in the company’s possession when it is struck off become the crown’s property.
Do I have to pay corporation tax if I close my company?
Yes, a certain amount of tax may be payable on the surplus of assets available in the company before its distribution with the shareholders.
What happens when a Pvt Ltd company is dissolved?
The co is no longer included on the register of companies maintained by ROC.
Can shareholders close a company?
Yes, shareholders can close a company if approved by a 75% majority.
What are the factors that contributed to the closure of the business?
Common reasons for business failure include poor location, inexperience, poor management, insufficient cash, unplanned expansion, personal use of funds, excessive investment in fixed assets, and unsatisfactory credit arrangements. But not every company fails and closes.
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