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DO YOU WANT TO CLOSE COMPANY ?

A company can be closed by adopting the following ways:-

(A) Strike off a company under Section 248 of companies act 2013 :

The Companies Act facilitates two modes of strike-off – namely, strike off by the ROC (Registrar of Companies) under Section 248(1) of the Companies Act 2013, and strike off by a company on its own accord under Section 248(2) of the Companies Act, 2013. This article dwells into the concept of strike off of Company with respect to both of these provisions.

(B) Winding Up

A company seeking to wind up or liquidate under Section 361 should meet the below-mentioned conditions: –

1. The book value of assets of the company does not exceed Rs 1 crore; and – Anyone of the below conditions based on the latest audited balance sheet:

2. In the case of a firm which has taken deposits, the total outstanding deposits do not exceed Rs 25 lakh or

3. In case the company has outstanding loans, the total outstanding loan including secured loan does not exceed Rs 50 lakh; or

4. The turnover of the company is up to Rs 50 crore; or

5. The paid-up share capital of the company does not exceed Rs 1 crore.

The winding up of a company may be either –

1. By the Tribunal (also known as compulsory winding up)

2. Voluntary winding up

3. subject to the supervision of the Court.

Voluntary Winding up : You can get a general picture from the following steps of winding up which are summarized below (except Voluntary winding up)

1. Issuing a written demand for debt payments to the target company.

2. Present a winding up petition to the court and the company

3. Court hearing for the petition

4. Granting of winding up order by the court

5. Meeting of creditors and other relevant parties

6. Appointment of liquidator.

7. Realization and distribution of company’s assets to the creditors

8. Realize of duties for liquidator

9. Dissolution of the company.

Legal Provisions in the Companies Act, 2013 for Company Closure

Section 248 gives power to the registrar of companies to strike off the name of a company in several situations; the powers of the ROC can be invoked by a company also for it striking off by filing an STK-2 application to the ROC. Here are the situations under which a company can make an application for its closure.

1. Section 248(1)a: When company failed to commence its business operation with one year of its incorporation.

2. Section 248(2)c: A company that started its business has become defunct or inactive, and such a company has been inactive for the past two financial years.

3. Section 248(2)d: The MOA subscribers have not paid the share capital within 180 days of the company incorporation. It means that the company just got registered, and its promoter shareholder contributes no capital.

Checklist for filing STK-2 Application for Company Striking off

1. The company must be defunct or inactive under section 248; there are three situations in which a defunct or inactive company can be struck off; check the appropriate section under which the application is to be filed.

2. Shareholder Consent: The company can file the STK-2 application only when the shareholders of the company adopt a special resolution. A minimum of 75% shareholders vote is necessary for passing a special resolution.

3. Pay all Government Dues: Before the decision to close the company is made, ensure that all government dues such as GST, Income Tax, PF, ESIC or any other company's liability towards the government are fully paid.

4. Close Bank Accounts: The company's bank accounts need to be closed, and you should obtain a complete bank statement and the Bank Closure letter from the banker. These documents are filed along with STK-2 Form.

5. No Assets or Liabilities: Before making the STK-2 application ensure that there is no assets or liabilities in the company; a statement of the assets and liabilities are filed with the STK-2 form after attestation with a Practicing Chartered Accountant.

6. No Litigation: There should not be any pending litigation for the applicant company with the state government, central government, or agencies. Also, check that no Income Tax or GST Assessment is pending.

7. CA Certification: A Chartered Accountant must attest to the Statement of Accounts showing NIL assets and liabilities in practice. The date of the statement should be within 30 days on which Form 24 is being filed.

8. Check DIN & DSC Status: Every year DIR-3(KYC) must be filed to keep the DIN active; check the DIN status; if the KYC has not been filed, Please do file the DIN KYC. As the application for striking off the company is filed using Digital Signature, check if the DSC is valid for the partners; if not, Go for DSC Renewal.

The Process of Company Closure

Section 248(2) of the Companies Act, 2013 and the Companies (Removal of Names of Companies from the Register of Companies) Rules prescribes a detailed process to close the defunct or inactive company. Following are the step-wise process for company closure.

Step - 1: Calling of EGM of the shareholders
To file the application in STK-2 Form for Company Closure to the ROC, a meeting of the company's shareholders must be called in to decide about the closure with at least 75% voting rights.

Step - 2: Surrender of Registration & Licenses
If the company had registered under GST or obtained licenses under any government department, the same need to be surrendered before an application for closure is filed by the company.

Step - 3: Bank A/c Closure & Prepare Financial Statement
The bank accounts of the company must be closed, and a certificate from the banker is needed. Prepare a financial statement with Nil Assets and Liabilities, A Practicing CA or Auditor shall certify it.

Step - 4: Affidavit & Indemnity Bond of All Directors
All directors and shareholders have to swear an affidavit that all information and documents being filed are true and correct and an indemnity bond that the directors shall pay in person if any liability comes up.

Step - 5: Filing of STK-2 Form
Check that the company has filed all pending ITR & ROC Return to the ROC. The application for closure of the company filed online with a digital signature in Form STK-22 with the government fee of Rs. 10,000/-.

List of Documents Required for Company Closure

1. All ITR and Returns Filed With ROC

2. Board Resolution Authorizing the Closure

3. Affidavit from all the Directors

4. Indemnity Bond from all the Directors

5. Consent of 75% of Shareholder

6. Bank Closure Statement

7. CA Certified Statement of Accounts

8. Identity and Current Address Proof of partners