INTRODUCTION
Closing a company means closing the operations of the company and removal of name of company from the ‘’Register of Companies’’ maintained by the Registrar of Companies.
A company can be closed by two separate ways i.e. (1) Strike-off Method under Section 248-252 of the Companies Act, 2013 read with Companies (Removal of Names From The Register of Companies) Rules, 2016 and the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017.
FIRST METHOD: STRIKE OFF VOLUNTARILY BY COMPANY ITSELF
Form & Provision:
The company which wants to close its business can apply voluntarily by filling E-form STK-2 with Registrar of Companies under Sub-Section (2) of Section 248 of the Companies Act, 2013.
Attachments of E-Form STK-2:
| STEP (1) |
Hold a Board Meeting to discuss and to decide the following-
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|---|---|
| STEP (2) |
Take shareholders’ approval for closure of the company –
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| STEP (3) | Closure of the all the associated bank accounts of the company and surrendering the Registrations or Licenses under any Law like GST, IEC etc. |
| STEP (4) | Check all the financial statement and annual returns are filed with the Registrar of Companies in their respective forms i.e. AOC-4 and MGT-7/7A up to the end of the financial year in which the company ceased to carry its business operations and filling of income tax returns of the company and if any fillings are due, then complete the same. |
| STEP (5) | Take No-Objection Certificates from the creditors only if there is any subsisting liabilities. |
| STEP (6) | Indemnity Bond (STK-3)
And
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| STEP (7) | Filling of E-Form STK-2 with all the necessary attachments and government fees of Rs. 10,000. Kindly note only two resubmissions are allowed in this form, so remember to attach all the necessary documents. |
| STEP (8) | Strike off by the ROC If ROC deems fit after examining the form, will notify its intention of strike-off the company in the official gazette (STK-7), this notification will remain in the official gazette for a month and if no objection is received from the general public, then the ROC will change the status of company to ‘’Struck-Off” in the master data and name of the company will be removed from the Register of Companies. |
COMPANIES WHICH CANNOT APPLY FOR STRIKE OFF UNDER SECTION 248(2) OF THE COMPANIES ACT, 2013
- Listed Companies
- Companies accepting any public deposits which are outstanding.
- Companies registered under Section 25 of the Companies Act, 1956 or Section 8 of the Act.
- Companies against which any case for prosecution is pending in a Court of law.
- Companies which hasn’t furnished the follow-up instructions on any report under section 208 of the Act.
- Companies delisted on account of non-compliance of listing regulations, listing agreement or any other statutory laws.
- Vanishing companies.
SECOND METHOD: VOLUNTARY WINDING UP
Introduction:
This process is initiated by the shareholders of the company including the appointment of liquidator and rest of the steps in the process.
The shareholders of the company can start the winding up of the company anytime only if there are no secured or unsecured creditors or employees on roll. After settling the dues, it is necessary to close all the Company bank accounts. The GST registration also to be surrendered in winding up off the company
The Winding up of a Company can be done voluntarily by the members of the Company, if :
- The company passes a special resolution for winding up the Company.
- The Company in general meeting passes a resolution which requires a company to wind up voluntarily as a result of the expiry of the period of its duration, any as per the Articles of Association or on the occurrence of any event in respect of which the articles of association provide that the company should be dissolved.
Provision:
The company which wants to windup can apply under the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017.
Required Documents: (59 (3) (a) of the Insolvency and Bankruptcy Code, 2016)
- Passing of Special Resolution.
- Declaration of Solvency duly verified by an Affidavit by Majority of Directors of the Company on Stamp paper of Rs.100/- (In case of Indian Directors) and in case of Foreign Directors, where the Directors are signing Declaration in a Foreign Country, such Declaration to be duly notarized and apostilled.
- Above Affidavit is to be accompanied by:-
- Audited Financial Statement of past two years/Since Incorporation whichever is later
- Records of Business Operations of past two year/Since Incorporation whichever is later
- Latest Financial Position of the Company, if any.
PROCESS FOR VOLUNTARY WINDING UP
| STEP (1) | Declaration of Solvency duly verified by an affidavit by majority of directors. |
| STEP (2) | Convene a Board meeting to discuss and approve the following-
|
| STEP (3) | Convene a General Meeting to discuss and approve the following by way of a special
resolution-
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| STEP (4) | Intimate to ROC within 7 days of approval of the resolution by members/subsequent
approval by creditors.
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| STEP (5) | The Liquidator needs to inform the IBBI within 7 days of his appointment date. I.e. within 7 days from the general meeting in which the appointment of the liquidator is approved by the members of the company. |
| STEP (6) | Make a public announcement in Form A of Schedule I within 5 days from his appointment.
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| STEP (7) | Opening of bank account for liquidation in the name of the company-“”VOLUNTARY LIQUIDATION’’ in the scheduled commercial bank within one month of passing of the special resolution in the general meeting.. |
| STEP (8) | The Liquidator should intimate the Income Tax Department regarding the voluntary winding up and take the No-Objection Certificate from the Income Tax Department. |
| STEP (9) | The liquidator shall submit a Preliminary Report to the corporate person within 45 days from the liquidation commencement date. |
| STEP (10) | Collation of claims by liquidator from Operational Creditor, Financial Creditor, Workmen and Employees, any other stakeholders(if any), Secured Creditor, Claims through Bills of Exchange & Promissory Notes. |
| STEP (11) | Verification of Claims & preparation of list of stakeholders by liquidator within 45/15 days (Refer note) from the last date for receipt of claims. (15 days is applicable in case no claims from creditors has been received till the last date for receipt of claims. |
| STEP (12) | Realization of Assets of the company |
| STEP (13) | Distribution of Proceeds within 30 days from the receipt of amount to the stakeholders. |
| STEP (14) | Preparation of Final report by Liquidator and it needs to be sent to:
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| STEP (15) | Application for Dissolution of company by Liquidator to the NCLT and NCLT shall pass an order for the dissolution of the Company. And Copy of this order to be filed within 14 days with the Registrar of Companies (ROC). |
FREQUENTLY ASKED QUESTIONS (FAQ’S) ON VOLUNTARY WINDING UP OF COMPANY
Q. Who can Voluntarily wind up the Company?
Corporate entities are eligible for voluntary winding up.
A corporate person can be a Company or a Limited Liability Partnership (LLP) or Any other entity incorporated with limited liability under any applicable law
Q. What is the meaning of Winding up of a company?
This is the process of ending the corporate entity of company.
Q. What are the provisions or rules applicable on the Strike-Off?
In India, Voluntary winding up is governed by Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017.
Q. What are the reasons for Winding up?
Primary reasons is company is unable to pay its debts.
FREQUENTLY ASKED QUESTIONS (FAQ’S) ON STRIKE OFF OF COMPANY
Q. What is the meaning of Strike off of a Company?
This simply means removal of company’s name from Register of Companies maintained by the Registrar of Companies.
Q. What are the provisions or rules applicable on the Strike-Off?
In India, Strike Off is governed by Section 248 of the Companies Act, 2013 and Companies (Removal of Names of Companies from the Register of Companies) Rules, 2015.
Q. Are there any methods of Strike off of company?
Yes, there two methods: Voluntary Strike off initiated by company and Involuntary Strike off initiated by the Register of Companies.
Q. What are the reasons for Strike off?
Primary reasons are:-
- -a company has failed to commence its business within one year of its incorporation.
- -a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company
Q. What is the Form and Fees for strike off?
E-form STK-2 with Rs. 10,000 government fees.
Q. What is the difference between voluntary and involuntary strike off?
Voluntary strike off is initiated by the company itself when it wants to close its business while involuntary strike off is initiated by the Registrar of Companies.
Q. What are required documents for filling STK-2 by the company?
- Board Resolution authorizing director to file application for strike off in STK-2 E-form using DSC.
- Copies of consent by at least 75% shareholders or Copy of Special Resolution passed by the shareholders and certified by all the directors.
- Self-Attested KYC (PAN & AADHAR) of all the directors and shareholders duly certified by a whole time practicing professional viz Chartered Accountant/Company Secretary/Cost Accountant
- Affidavit (STK-4) signed by all directors and duly stamped and notarized.
- Indemnity Bond (STK-3) signed by all directors and duly stamped and notarized.
- Statement of Accounts (STK-8).
- Bank Account Closure Certificate
