Company Closure

Closing a company in India involves a detailed process to ensure compliance with the Companies Act, 2013. The procedure varies depending on the method of closure chosen, such as voluntary winding up, striking off the name, or liquidation. Here’s a comprehensive guide for each method:

Voluntary Winding Up

1. Board Meeting:
   • Convene a Board Meeting: Issue a notice to all directors to convene a board meeting.
   • Pass a Board Resolution: Approve the proposal for voluntary winding up. Also, approve the draft notice for an Extraordinary General Meeting (EGM) to get shareholder approval.
2. General Meeting:
   • Issue Notice: Issue a notice for the EGM to all shareholders, directors, and auditors of the company at least 21 clear days before the meeting. The notice should include the date, time, venue, and agenda of the meeting along with an explanatory statement.
   • Pass a Special Resolution: Obtain shareholder approval by passing a special resolution for voluntary winding up.
3. Declaration of Solvency:
   • Prepare Declaration of Solvency: Directors must prepare and file a declaration of solvency with the Registrar of Companies (ROC) before passing the resolution. The declaration should state that the company can pay its debts in full within a specified period not exceeding 3 years from the commencement of winding up.
4. Appointment of Liquidator:
   • Appoint a Liquidator: The shareholders must appoint a liquidator to wind up the affairs of the company and distribute its assets.
5. Filing with ROC:
   • Form MGT-14: File the special resolution with the ROC within 30 days of passing it. Attach the following documents:
     • Certified copy of the special resolution.
     • Notice of the EGM along with the explanatory statement.
   • Form GNL-2: File the declaration of solvency in Form GNL-2.
   • Form GNL-2 (for Liquidator’s Appointment): File the appointment of the liquidator in Form GNL-2.
6. Liquidation Process:
   • Liquidator’s Statement: The liquidator must prepare a statement of account showing how the winding up has been conducted and how the property of the company has been disposed of.
   • Final Meeting: Convene a final general meeting of the company to present the liquidator’s statement of account.
7. Filing Final Returns:
   • Form GNL-2: File the liquidator’s statement of account with the ROC in Form GNL-2.
   • Form GNL-2 (for Final Meeting): File a copy of the final meeting’s minutes and a return in Form GNL-2.
8. Dissolution Order:
   • After the final returns are filed, the ROC will issue a dissolution order, officially dissolving the company.

Striking Off the Name (Fast Track Exit)

1. Eligibility Check:
   • Ensure the company is eligible for striking off. It should not have any ongoing business activity or liabilities.
2. Board Meeting:
   • Convene a Board Meeting: Issue a notice to all directors to convene a board meeting.
   • Pass a Board Resolution: Approve the proposal for striking off the company’s name and authorize a director to file the necessary application with the ROC.
3. General Meeting:
   • Issue Notice: Issue a notice for the EGM to all shareholders, directors, and auditors of the company at least 21 clear days before the meeting. The notice should include the date, time, venue, and agenda of the meeting.
   • Pass a Special Resolution: Obtain shareholder approval by passing a special resolution for striking off the company’s name.
4. Filing with ROC:
   • Form MGT-14: File the special resolution with the ROC within 30 days of passing it. Attach the certified copy of the special resolution.
   • Form STK-2: File an application for striking off the company’s name in Form STK-2. Attach the following documents:
     • Certified copy of the special resolution.
     • Indemnity bond duly notarized by every director in Form STK-3.
     • Affidavit by every director in Form STK-4.
     • Statement of accounts showing no assets and liabilities, made up to a date not more than 30 days before the date of application, certified by a Chartered Accountant.
     • Copy of the board resolution authorizing the filing of this application.
5. Publication:
   • The ROC will publish a notice in the Official Gazette and wait for any objections from stakeholders.
6. Striking Off:
   • If no objections are received, the ROC will strike off the company’s name and send notice to the company, which will be published in the Official Gazette, effectively dissolving the company.

Compulsory Liquidation

1. Petition for Liquidation:
   • A petition can be filed for the compulsory liquidation of the company by any creditor, contributor, or by the company itself.
2. Tribunal Order:
   • The National Company Law Tribunal (NCLT) will hear the petition and, if satisfied, will pass an order for winding up.
3. Appointment of Liquidator:
   • The NCLT will appoint an official liquidator to take charge of the liquidation process.
4. Liquidation Process:
   • The liquidator will take control of the company’s assets, evaluate claims, and distribute the assets among the creditors and shareholders according to the law.
5. Dissolution Order:
   • Upon completion of the liquidation process, the liquidator will apply to the NCLT for a dissolution order. Once the NCLT passes the order, the company is officially dissolved.

Important Points

• Ensure all statutory compliances and filings are up to date before initiating the closure process.
• Maintain proper records of all meetings, resolutions, and filings for future reference.
• Inform all stakeholders, including employees, creditors, and authorities, about the closure.
• Consult with a professional, such as a Chartered Accountant or Company Secretary, to ensure all legal requirements are met.

By following these steps diligently, you can ensure a smooth and compliant closure of your company.