Process of Closing A Private Limited Company

Introduction: Since the inception of the Companies Act, 2013, the Compliances of carrying out business through a Company in increasing day by day. Increase in compliances majorly hit those who do not perform substantial activities in the Company since they are required to pay both Government filing fees and Consultant’s fees in relation to maintaining the Company.

Moreover, the Government has also put in place new Compliances like MSME Form 1 (For MSME Payables), DPT-3 (For deposits or transactions not considered as deposits), BEN-2 (For beneficial shareholder’s information) and increased the late fees of some already in-place forms like MGT-7 (Annual Return), AOC-4 (Financial Statements) where the LATE FEES have been increased to Rs. 100 per day in case of delay.

In cases where a person has incorporated a Company for any potential project but the same had not been successful due to some reasons or such person now want to work in less cost and less compliant environment such as by Constituting Partnership Firm, Proprietorship Concern, he can simply close his Company by following the process enumerated below.

STEP BY STEP PROCESS OF CLOSING A COMPANY:

Step 1: Extinguish all the liabilities of the Company:

Before making an application with the Registrar of Companies (ROC) for closing a Company, make sure that all the liabilities of the Company have been paid off and nothing is pending to be payable.

Step 2: Consent of at-least 75% of the members:

Since shareholders are the owners of the Company, hence law provides that Consent of at-least 75% of the members of the Company (in terms of paid-up share capital) shall be taken before filing closure application.

Note – Consent of 75% is to be seen based on the amount of share capital and not as per number of members.

Step 3: File e-Form STK-2:

The Company needs to file e-Form STK-2 (Form for striking of name of the Company) with the ROC along with a fee of Rs. 5,000 (Rupees five thousand).

The following are mandatory to be given in e-Form STK-2:

1.  A statement of account in Form STK-8 showing the assets and liabilities of the Company made up to a day, not more than 30 days before the date of filing e-Form STK-2.

The attached statement of account shall be duly certified by a Chartered Accountant (CA).

2. Copy of Board resolution authorizing filing of e-Form STK-2.

3. Copy of Special Resolution or copies of Consent of 75% of the members of the Company in terms of paid up share capital.

4. Indemnity Bond signed by each Director of the Company in Form STK-3 indemnifying future legal claims against the Company, loss to any person due to closing of Company.

5. Affidavit by each Director of the Company in Form STK-4.

6. Statement in relation to pending litigations involving the Company.

ONCE THE APPLICATION IS APPROVED BY THE REGISTRAR OF COMPANIES, THE STATUS OF THE COMPANY SHALL BE MARKED AS “STRUCK OFF” FROM “ACTIVE”. 

Special Notes:

1. Before filing e-Form STK-2, all the overdue returns (MGT-7, AOC-4) which were due till the financial year in which the Company ceases to carry of its business.

2. e-Form STK-2 is also required to be certified by a Chartered Accountant, Company Secretary or Cost Accountant in whole time practice.

3. A Section 8 Company (NPO Company) cannot be strike off by above procedure.

4. No e-Form STK-2 can be filed by such Company:

• Which has changed its name or shifted its registered office from one state to another in last three months
• Which is being wound up under the Insolvency and Bankruptcy Code, 2016.
• Which has made application for Compromise or Arrangement and the matter is not finally concluded

5. The Company which has filed e-Form STK-2 shall also place the application on its website, if any, till the disposal of the application.

6. A Dormant Company can also file this form in order to get closed.

7. Till the time e-Form STK-2 will be pending for approval, no other form can be filed by the Company with ROC.