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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OVERVIEW
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.
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Process
Pvt Ltd Company Closure Process
Closing a Pvt Ltd company can be done through various methods, including compulsory winding up and voluntary winding up. With years of experience, our professionals have successfully assisted numerous clients in navigating the company closure process.
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Below is a quick and easy guide to understanding the Pvt Ltd company closure process.
✅ Step 1
The first step is to fill in the required details in the Pvt Ltd company closure form and submit the necessary documents.
✅ Step 2
Our professionals will draft the affidavit for company closure along with other relevant documents, which will be submitted for your signature.
✅ Step 3
We will submit your most recent statement of accounts, certified by a CA, along with the closure application to the Ministry of Corporate Affairs (MCA).
✅ Step 4
Once the Registrar of Companies (ROC) approves the application, the Pvt Ltd company will be legally closed.
Learn More About Closing a Private Limited Company
Not every business idea is executed exactly as envisioned. Due to unforeseen circumstances, things may not work out as planned, leading you to consider closing your private limited company.
Closing a private limited company is not a simple task—it requires careful adherence to legal procedures and regulations. One option for voluntarily ceasing business is by liquidating your investment, but other legal methods are also available. In this guide, we’ll explain the steps involved in voluntarily closing a private limited company.
The process of closing a private limited company is complex. You must comply with government laws and regulations, which include filing final accounts, paying any outstanding taxes, and submitting necessary documentation.
Different Methods
Different Methods for Closing a Private Limited Company
✅ Closure of a Private Limited Company by ROC (Registrar of Companies) as Defunct
If a private limited company has been inactive for over two years or has not conducted any business since its incorporation, it can be declared defunct. The simplest and most straightforward method is to file an application in Form STK-2 with the Registrar of Companies (ROC). This legal process ensures that the company is officially recognized as inactive and can be closed without any ongoing obligations.
✅ Voluntary Winding Up of a Private Limited Company
A company can choose voluntary winding up with the approval of three-fourths of its shareholders. The Board of Directors can apply to the National Company Law Tribunal (NCLT) for voluntary liquidation. During this process, an insolvency professional addresses financial difficulties and legal claims, providing a liquidation strategy and dissolution plan. Once the NCLT reviews the plan, it passes an order to wind up the company and officially dissolve its operations.
✅ Compulsory Winding Up of a Company by NCLT
In cases where creditors, the central government, or ROC initiate compulsory liquidation, the National Company Law Tribunal (NCLT) oversees the process. An official liquidator is appointed, and the company’s assets and liabilities are evaluated. The NCLT then sanctions the liquidation order based on the findings. This is a legal way to shut down a company when voluntary closure is not an option.
Required Documents
Documents Required for Closing a Pvt Ltd Company in India
When closing a private limited company, you need to submit specific documents to ensure the process is legally compliant. Here are the essential documents required for the closure.
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Income Tax Returns (ITR) and Returns Submitted to the ROC
All ITRs and returns that have been filed with the Registrar of Companies (ROC) need to be provided as part of the company closure process.
Board Resolution Authorizing Company Closure
A formal board decision (resolution) from the company's directors authorizing the closure of the company must be submitted.
Statements from Each Director
Statements made by all directors regarding the closure process, confirming their consent and involvement.
Indemnity Bond from Each Director
An indemnity bond signed by each director, ensuring they take responsibility for the company’s closure and liabilities.
Shareholder Approval (75%)
A resolution passed by at least 75% of the shareholders agreeing to the closure of the company.
Bank Closure Statement
A statement from the company’s bank confirming that the company’s accounts have been closed.
Bank Closure Statement
A statement from the company’s bank confirming that the company’s accounts have been closed.
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Certified Accounting Statement (by a Chartered Accountant)
A final certified accounting statement from a Chartered Accountant (CA), confirming the financial status of the company.
Proof of Identity and Address of Partners
Valid proof of identity and current residential addresses of the company’s directors and partners.
Why Choose JustStart?
Why Choose JustStart for Private Limited Company Closure?
Choosing JustStart for your Private Limited Company closure ensures a seamless, compliant, and efficient process.
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Here’s why JustStart is the ideal partner:
✅ Fully Automated, Tech-Enabled Platform
At JustStart, we leverage technology to create an efficient, streamlined portal for company incorporation and compliance management, ensuring fast and accurate service.
✅ Experienced Legal Professionals
Our team of seasoned legal experts brings years of experience, providing trustworthy guidance and support through every step of your company’s legal processes.
✅ Client-Centric Approach
We prioritize the needs of our clients, using technology and expertise to deliver quality services that simplify complex legal procedures.
✅ Reliable and Transparent Service
JustStart maintains a commitment to reliability and transparency, ensuring that clients are fully informed and supported throughout their company’s lifecycle.
Locations
Procedure to Close Pvt. Ltd. in Other States and Cities
FAQs
LET'S CLEAR ALL THE DOUBTS!
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.
Within 30 days after the day the assets and liabilities statement were signed, the closing paperwork must be submitted.
It usually takes 90 days after submitting the application to the Ministry of Corporate Affairs for the company to be removed from MCA records.
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.
Yes, a certain amount of tax may be payable on the surplus of assets available in the company before its distribution with the shareholders.
The co is no longer included on the register of companies maintained by ROC.
Yes, shareholders can close a company if approved by a 75% majority.
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.
