Closure of Private Limited Company
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Closure of Private Limited Company - Overview
Since 2015 and 2016 (Post Demonetization), the Ministry of Corporate Affairs and the Government of India have implemented numerous measures to boost the growth and well-being of companies, stakeholders, and directors. These measures include various exemptions for Private Limited Companies through amendment acts, the CODS Scheme in 2018, the Companies Amendments Bill 2017, and zero fees for the incorporation of companies. These initiatives were largely welcomed by a significant number of businesspeople and other stakeholders.
Unfortunately, many corporates and directors did not even open company bank accounts and failed to comply with requirements such as filing income tax returns, annual returns, and audited financial statements with the Registrar of Companies on the MCA portal.
In response, the MCA enforced strict regulations against non-compliant entities, shell companies, and dubious directors. Stringent amendments included the disqualification of DIN for five years, the introduction of mandatory e-form INC-20A as proof of opening bank accounts, yearly KYC of directors via e-form DIR 3 KYC (non-filing of this form results in a penalty of Rs 5000/- per director), the filing of DPT-3 Forms from 2019 (for secured and unsecured loans and deposits of companies), the filing of Form MSME-1, additional fees of Rs.100 per day for late filing of financial statements in e-form AOC-4, AOC 4 CFS, AOC-4 XBRL, and annual returns in MGT 7 (Form MGT 7A for OPC and Small Companies has also been recently introduced).
Additionally, the MCA has eased the procedure for closing down defunct or inoperative private limited companies. The provisions relating to this process are discussed below.
Closure of Private Limited Company – Situations
Closure can be pursued under the following circumstances:
- The company has not commenced business operations within one year of incorporation.
- The company has not conducted any business activities during the preceding two financial years and has not applied for the status of Dormant Company under Section 455 of the Act.
- The signatories to the Memorandum of Association have not paid or undertaken to pay their subscription money within 180 days from the date of incorporation.
- Indemnity Bond: Notarized by every director of the company in Form STK-3.
- Assets and Liabilities Statement: A recent statement in form STK-8, depicting the financial position of the company, not more than 30 days before the application date, certified by a Chartered Accountant.
- Affidavit: In Form STK-4 from every director of the company.
- Special Resolution Copy: A certified true copy of the special resolution or the consent of 75% of the company’s members in terms of paid-up share capital as of the application date.
- Pending Litigations Statement: Information on any pending litigations involving the company.
- No Objection Certificate (NOC): From other regulatory authorities like SEBI, RBI, etc., if applicable.
Points to Note Before Filing for Voluntary Closure
- Statutory Challan Fees: A single flat fee of INR 10,000/- for filing e-Form STK-2.
- Overdue Forms: All overdue forms, i.e., Form AOC-4 and MGT-7, must be filed up to the end of the financial year in which the company ceased operations.
- Certification: The e-Form STK-2 must be certified by practicing professionals (Company Secretary/ Chartered Accountant/ Cost Accountant).
- Restrictions on Application: An application for strike-off cannot be made if, in the previous three months, the company:
- Has changed its name or shifted its registered office from one state to another.
- Has disposed of property or rights held by it, except in the normal course of business.
- Has engaged in any other activity except for the purpose of making an application, concluding its affairs, or complying with statutory requirements.
- Has made an application to the Tribunal for sanctioning a compromise or arrangement that has not been concluded.
- Is being wound up under Chapter XX (Winding Up of Company) of the Companies Act 2013 or IBC 2016.
For further assistance, contact Udyam for professional guidance.
Step-by-Step Process for Closure of Private Limited Company
- Extinguish Liabilities: The company must first extinguish all its liabilities.
- Board Meeting: Hold a board meeting to approve the voluntary closure of the company and draft a notice for convening an extraordinary general meeting (EGM).
- EGM: Convene the EGM and pass a special resolution for the voluntary closure of the company.
- File e-Form MGT-14: Report the special resolution passed by the company.
- Application with ROC: File an application with ROC in e-Form STK-2 with all mandatory attachments to remove the company’s name from the RoC.
- ROC Approval: Once satisfied and after completing necessary scrutiny, the ROC will strike off the company’s name, and the strike-off will be published in the official gazette in form STK-7.
FAQs
No. RTZ Pvt Ltd must first file all overdue documents before making an application for a strike-off.
Yes. ASBV Pvt Ltd can make an application for a strike-off without filing documents for the subsequent financial years.
No. Once the notice of strike-off in form STK-7 has been published by the ROC, the company cannot apply for a voluntary strike-off.
