HOW TO CLOSE A COMPANY
A company can be closed in following way:
01. By strike off (section 248-252)
02. By voluntary winding up (section 59 of IBC,2016)
03. By obtaining dormant or inactive status (section 455)
STRIKE OFF
Grounds of strike off:
01. Co. has not commenced its business within 1 year from incorporation.
02. Co. has not been pursuing any business for preceding 2 financial years.
Strike off is divided into two parts:
01.strike off by ROC The ROC may issue a notice to the Companies and its Directors in Form STK-1 (Removal of Names of Companies from the Registrar of Companies) if he has a reasonable cause as specified above. Such a notice would inform the companies of the removal of its name from the record and request it to send its objection with the requisite documents within thirty days of the issue of such notice. This process is also referred to as Compulsory removal of name from the Registrar of Companies
02.strike off by company itself
A company may file an application to the ROC in E-FORM STK-2 after closing off its liabilities. This could be performed by passing a special resolution.
Checklist for STRIKE OFF
01.Hold board meeting and pass board resolution for strike off of company.
02.All liabilities need to be paid off
03.Hold AGM and take consent of shareholders through special resolution
04.Company to file application for strike off to ROC with following documents
• Indemnity Bond duly notarized by all directors (in Form STK 3).
• A statement of liabilities comprising of all assets and liabilities of the companies (certified by a Chartered Accountant).
• An affidavit in Form STK 4 (by all directors of the company).
• CTC of Special Resolution (duly signed by every director of the company).
• A statement concerning any pending litigations with respect to the company.
05.Company not to file application of strike off if during the last 3 months it has:
• Changed its name or relocated its registered office to another state.
• Made a disposal for the value of property or rights held by it.
• Engaged in any other activity other than what is necessary or expedient for making an application under the concerned provision, and so and so forth.
• Filed an application to the Tribunal for the granting of Compromise or Arrangement, and a consensus for the same hasn’t yet been arrived at.
• Been wound up under Chapter XX, whether voluntarily, by the Tribunal or under the Insolvency and Bankruptcy Code (IBC), 2016.
Following companies cannot follow the provision of strike off:
• Listed companies.
• Companies delisted on account of non-compliance of listing regulations, listing agreement or any other statutory laws.
• Vanishing companies.
• Companies which have been listed for inspection or investigation – if such directive is being carried out/pending/completed but the prosecutions concerning such inspection or investigation are pending in the Court of law.
• Companies which haven’t yet responded to notices of select provisions.
• Companies which haven’t furnished the follow-up instructions on any report under section 208 of the Act.
• If the prosecutions related to the above two provisions are pending in a Court of law.
• Companies against which any case for prosecution is pending in a Court of law.
• Companies, whose application for compounding is pending before the competent authority for compounding the offences committed by it or any of its officers in default.
• Companies accepting any public deposits which are outstanding.
• Companies having any charges which remain to be satisfied.
• Companies registered under Section 8 of the Act.
WINDING UP OF COMPANY
It can be either done by tribunal or company can make an application to tribunal for winding up (voluntary winding up)
Company can be wound up voluntarily for various reasons like if it is not able to carry on business or to meet its financial obligation etc.
Checklist for VOLUNTARY WINDING UP
01.Conve board meeting to discuss and approve
- Voluntary winding up
- Appointment of liquidator
- Approve declaration of solvency (before voluntary winding up, co. needs to file an acknowledgement that it is solvent, and it can pay its debt as and when they become due)
- Affidavit to be accompanied by: Audited Financial Statement of past two years, Records of Business Operations of past two-year, Report by the Registered Valuer about the valuation of the assets of the Company, Latest Financial Position of the Company
- To fix date time of general meeting
02.Issue notice for general meeting
03.In general meeting pass SR for voluntary winding up and appoint liquidator
04.Conduct meeting of creditors and take their approval
05.Company to intimate ROC and IBBI
DORMANT OR INACTIVE STATUS
The following condition should be fulfilled before applying to become a dormant company:
• There should be no prior inspection, inquiry or investigation ordered or taken up or carried out against the company.
• Neither should the company have any public deposits which are outstanding nor any default in payment or interest.
• There should be no prosecution proceedings started against the company under any provision of law.
• There should be no default in the payment of workmen’s dues.
• No unpaid statutory taxes, dues, duties, payable to the central government or the state government or other local authorities.
• The procedural formalities for obtaining the status of a dormant company have not been made to deceive the creditors or defraud any other person.
• It should be excluded from any list of securities of the company on any stock exchange domestic or international.
• There should be no conflict in the management of the company or ownership of the company and a certificate should be attached under the form MSC-1
• The company should not have any loans.
Checklist to obtain status of dormant company:
• To call a Board Meeting to obtain dormant status.
• Authorization the director to make an application with the ROC.
• Issue notice of General Meeting.
• Facilitate an auditor or chartered accountant to issue the certificate.
• Pass a special resolution with the consent of three-fourths of the shareholders of the company.
• File an e-form MGT-14 with the ROC.
The following are the attachment required by the company to obtain the status of dormancy:
• Notice of extraordinary general meeting with an explanatory statement.
• CTC of Board resolution.
• CTC of Special resolution.
• File Form MSC-1 with the registrar of the company.
• Certificate issued by the auditor or chartered accountant.
• Statement of affairs certified by the auditor or the chartered accountant.
• Recent financial statement and the annual return of the company is mandatory.
• Certificate of no dispute in the management and ownership of the company.
• Consent of the lender.
After the approval by the registrar a certificate of status of a dormant company is sent to the user as an attachment in the email and once the form is approved the status of the company is changed as per Section 455 of the Act.
