Recently, a friend of mine approached me saying that he wants to close his company as he has never started any operations in that company and does not have any intention to do so.
“When was your company incorporated?” I asked.
“Five months back.” He answered.
“You need to wait for at least one year to file an application with Registrar of Companies (RoC) as they will not accept your application before that.” I replied.
“Is it so?” He asked.
“Yes.” I answered.
There are lot of people who has similar concerns and each can have different reasons as to why they want to close their companies. However, the law is well defined on the procedures, rules and restrictions to be followed.
Before starting with the process, one must analyse few basic points. I have listed them as eligibility criteria for closing a company:
1. The company has failed to commence its business within 1 year of its incorporation;
2. The company is not carrying on any business or operation for a period of 2 immediately preceding financial years and have not applied for dormant status.
3. The subscribers to the memorandum have not paid the subscription amount which they had undertaken to pay at the time of incorporation of a company and a declaration to this effect in e-Form INC 20 A has not been filed within 180 days of its incorporation;
4. The company is not carrying on any business or operations, as revealed after the physical verification carried on the RoC.
Once, these questions are answered then only one can decide on how to proceed with closing a company.
Process for closure of a company-
The company must extinguish all its liabilities as a first step for strike off.
After which it has to-
- hold a board meeting for approving voluntary closure of a company and notice for convening an extra ordinary general meeting (EGM).
- Convene the EGM and pass a special resolution for voluntary closure of company.
- File e-Form MGT-14 for reporting of special resolution passed by the company.
Alternatively, where the company does not wish to hold EGM, a consent letter from 75% of the members, in terms of paid-up share capital of the company to be obtained.
- File an application with RoC in e-Form STK-2 with all the mandatory attachments mentioned above to remove the name of the company from RoC.
- Once the RoC is satisfied and the e-Form is approved after completing all the necessary scrutiny, it will strike off the name of the company.
Documents required before filing the strike off application:
1. Indemnity bond notarised by every director of the company in Form STK-3;
2. Statement of accounts in Form STK-8 containing assets and liabilities of the company made up to a day, not more than thirty days before the date of application and certified by a Chartered Accountant;
3. Affidavit in Form STK-4 from every director of the company;
4. A copy of the special resolution duly certified by each director of the company or consent of 75% of the members of the company in terms of paid up share capital as on the date of application;
5. a statement regarding pending litigations, if any, involving the company;
6. Where a company is registered with any other regulatory authorities like SEBI, RBI etc., No Objection Certificate (NOC) from such regulatory bodies shall be obtained.
Points to be kept in mind to to Close a Private Limited Company (Strike Off):
1. The fees for filing of e-Form STK- 2 is INR 10,000/-.
2. All the overdue forms i.e., Form AOC-4 and MGT-7 up to the end of the financial year in which the company ceased to carry its business operations should be filed with the RoC.
3. The e-Form STK-2 shall be certified by a practicing professionals (Company Secretary/ Chartered Accountants/ Cost Accountants.
4. An application for strike off cannot be made if, at any time in the previous 3 months, the company-
i. has changed its name or shifted the registered office of the company from one state to another;
ii. has made a disposal for value of property or rights held by it, which is a normal course of business for that company and such disposal is not done for the purpose of filing of application for closure of company;
iii. has engaged in any other activity except the activity which is necessary for the purpose of making an application, or concluding the affairs of the company, or complying with any statutory requirement;
iv. has made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded; or
v. is being wound up under Chapter XX (Winding Up of Company) of Companies Act, 2013 or under the Insolvency and Bankruptcy Code, 2016.
In case you have any questions or need clarity on any provisions relating to strike off of a company, you may write to me at [email protected]
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