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Closure Up of Company
How to Close a Private Limited Company? There are four ways in which a private company can be closed. The companies owners or directors can decide to discontinue or wind up the business. The directors swear that they are the directors of the company applying for closure.
A private limited company demands to be windup or to be closed, meantime, there is no changes in the business or the Directors of the private limited company, and is not willing to continue their business operations. Any private limited company can wind up both ‘voluntary’ and ‘compulsory elements’. PVT LTD company closure charges is a perusal that involves dickering all the properties, assets, paying off all the loans and debts, paying all bankers and distributing the remaining properties or assets to the shareholders of the private limited company. However, it is always challenging to form a business or a company.
For Closure up small businesses without having to go to a tribunal, the Ministry of Corporate Affairs has notified the rules 2020, as per the provision in the Companies Act which provides an alternative to the normally used liquidation procedure as per India’s bankruptcy code. The scope of Company Law in India is extensive and unrestricted; it takes into account the depth of Closure up of a company and liquidation of its properties and assets. During the period of ‘Closure up of a company’ if its members fail to comply with the rules and regulation, they can get held criminally or civilly liable.
A summary procedure for closure of pvt ltd company is conducted as per section 361 of the Companies Act, 2013. The liquidation process is carried out by an Official Liquidator prescribed by the Central Government.
Advantages of Closure Up of Company
from debts and responsibility after Liquidation
Once the process of liquidation is over, the directors and the administrators of the company are free from all debts, responsibilities, lender accounts and pressure.
The low lost needed for the Liquidation process
The price or responsibilities expected in the liquidation process is relatively small, as rates will be employed to the sale of assets of the company.
Withdrawing legal action from the Company
If the recommendation or consideration is passed advisedly by directors of the company, they will dismiss legal action brought by the tribunal or by the court and allow the company directors to concentrate on other business possibilities.
Withdrawing legal action from the Company
If the recommendation or consideration is passed advisedly by directors of the company, they will dismiss legal action brought by the tribunal or by the court and allow the company directors to concentrate on other business possibilities.
Protection for investors or creditors
Complying a continued struggle, investors or creditors will benefit from the liquidation process as they will be useable for a failed payment, regarding the statement of credits given by all investors or creditors.
Documents needed to file the appeal
- Returns Filed with ROC and Ultimately ITR
- Form Comp 1 for Closure up petition
- Form Comp 2 for Declaration of truth:
- Form Comp 3 for Certification of service:
- Proclamation of Closure up petition of the company
- A list of people inspecting the hearing: Form Comp 4
- PAN Card of the company
- Formulation of Preliminary Report by IP
- Submission of Proof of Claim in Form B, in Form C, Form E, Form D, Form F, by Electronic means or through the post.
- A formal declaration of the closing of the company’s bank account along with NIL contracts.
- An indemnity bond – notarized by the directors of the company
- Latest bank statement of accounts of the company.
- Application for drawing out the name of the company.
- Indemnity Bond of all the Directors of the company
- Detailed reports related to all properties, assets and liabilities of the entity audited by a Chartered Accountant (CA)
Conditions for Closure Up of a company
- A company seeking to liquidate or wind up as per Section 361 should meet the following conditions:
- The book value of properties of the company should not exceed more than 1 crore; and Any of the below-mentioned conditions as per the latest audited balance sheet:
- If a company which has draw deposits, as the total outstanding company deposits do not exceed more than Rs 25 lakh or
- The annual turnover of the company does not exceed more than Rs 50 crore; or
- The paid-up share capital of the entity does not exceed more than Rs 1 crore.
Official Appointment of an Official Liquidator
The Official Liquidator for the company is appointed by the central government attempting Closure up of the company as per the summary procedure for liquidation.
The procedure of Summary Liquidation
Sale of properties and assets of the company
The Official Liquidator who is appointed for procedure for closing a private limited company will dispose of all the property and assets belonging to the company after receiving the approval from the central government. Every sale after that has to be done after getting the confirmation of the central government. The gross sale will be paid to the liquidator. Any expenses obtained in related with the sale shall be paid by the liquidator out of the gross sale proceedings. The money received by the Official Liquidator will be paid into the public account of India in the Reserve Bank of India (RBI) as per section 349 immediately.
Payments to investors or creditors
Within thirty days, the Official Liquidator appointment should call upon the investors or creditors of a company to explain and to prove their claims or due payments from the company. The claims must be made within a time of thirty days in specified format from the receipt of the call from the official liquidator. The liquidator shall investigate and examine the proof of debt or loan lodged by the investors or creditors. And within the time period of 30 days from the time allowed for submitting the claims, the liquidator shall present the list of creditors to the Central Government. The liquidator after the approval shall then discharge the debts or loans or dues of the creditors.
Duties of the Official Liquidator
The Official appointed Liquidator shall take control or custody of all the property and assets of the company and effects and actionable calls are done by the liquidator to which the company is entitled or seems to be entitled. It includes all assets of the company and all payment due to the company. The official liquidator has the power to appoint an agent or auctioneer after the approval of the central government to execute the process of selling the assets and properties of the company.
Duties and responsibilities of the Official Liquidator
The Official Liquidator shall examine and investigate all the affairs of the company and submit a detailed report to the Central Government in the specified format. The report shall clearly describe whether any fraud or dupery has been committed in formation, promotion, marketing or management of the matters of the company. If the liquidator’s report demonstrates any fraud or dupery carried out by the promoters, shareholders, directors or any other officer of a firm, the Central Government might direct further investigation into the matters and affairs of the company.
Closure-up Order
After conducting a proper investigation, the report is submitted by the Official Liquidator, on all verification processes, the Central Government may order to commence the Closure-up process in the same manner in which a firm or company is wind up by the tribunal.
Frequently Asked Questions
- Must be in form WIN 4
- Information must not be older than 30 days prior to filing of petition
- Must be verified by an affidavit- in form WIN 5
- Every contributory shall be entitled to receive a copy of petition
- Within 24 hours of requisition
- CL to take charge of assets and books & papers of the Company
- Where the promoters/ directors of the Co. do not cooperate, CL can file an application against them
- May make an application before Tribunal thereby seeking direction upon any contributory/ trustee etc. to pay such sum to which the co. is entitled
- Sec 288 requires CL to submit quarterly reports to the Tribunal
(R. 34), after settlement, CL can make application for rectification in the list.
- A creditor cannot vote in respect of any unliquidated damages, value of which is not ascertained;
- in respect of any debt secured by a current bill of exchange or promissory note held by him
- A secured creditor shall, unless he surrenders his security, state the particulars of his security,
- shall be entitled to vote only in respect of the balance due to him, if any, after deducting the value of his security
- Not more than 12 persons, being creditors and contributors
- Such other persons, as Tribunal may deem fit
- CL must summon a meeting of the creditors and members
- Tribunal may make order that vanacy might not be filled
- The committee, not having less than 2 members may continue, notwithstanding any vacancy.
