Shutting down a company is a long and complicated procedure. A private limited company can be closed down in various manners depending on the requirement of the owner.
A company can be sold by transferring the majority shares to the person best suited for the company. The procedure of eventually winds up the company, but only the majority of the shares are transferred with the responsibility of stocks.
Any company that wants to strike off its name from the registrar of the company can declare itself defunct by applying Form FTE and then the company can be shut down by the registrar of the company.
Winding up of the private limited company is necessary in the case where the company needs to conclude its business or due to bankruptcy. The winding up method can be initiated intentionally by the shareholders or creditors, or it can also be done on the order of the tribunal (Compulsory Winding up ).
If the company is not dissolved and the assets are not collected as per the legal proceedings, the company is considered in operation, and hence the directors will be liable for completing all the compliances associated with the private limited company.
Based on the following ground the members or creditors of the company can file for winding up of the company:
Procedure to liquidate or wound up the private limited company can be done voluntarily, or the process can be initiated by debtors application to the court or in certain cases if the contractual obligation by the company has not been fulfilled.
The entire procedure of bringing an end to a company through a lawful procedure has been broken down into two stages
This the first stage in the closing of a private limited company and this process first assets are realised so that liabilities are paid off and if any surplus is left in then it has to be distributed amongst the members of the private company.
Dissolution of the company is a way through which you can end the company as a separate entity. The process closes down the entire company down after realising all the assets and distributing surplus within the shareholders of a private limited company.
A private limited company can be wound up through 3 modes:
Voluntary winding up takes place when the members of the company come up with a mutual decision to end the company affairs. The process of voluntary winding up can be completed by passing a special resolution stating the winding up of the company; the resolution can be moved in the general meeting.
As per the Companies Act 2013, Any Company, who did any fraudulent act or unlawful act or even if they contributed some action in some fraudulent or illegal act then that company shall be Compulsorily wound up by the Tribunal.
Following is the procedure for compulsory Winding Up
The following parties will file a petition
While filing the documents under Form 4. The Chartered Accountant should audit all the documents and Auditor should give an Unqualified opinion for the Financial Statement.
The Petition should be Advertised in a daily newspaper, and the language of the advertisement should be in English and Regional Languages in the area. The Advertisement must be carried out under Form 6
Form 11 will be required for the order of winding up the company, and the following prescribed duties need to be followed.
There are times when a private limited company requires to wind up its operations, but the directors or creditors have not come to the same conclusion that the company needs to be dissolved in order to pay all its debts. Following are the reasons for winding up a private limited company.
If the Company has no debt or Creditors
If the company has no debt or creditor, then it need not follow the winding up procedure it can directly apply for striking off of the company from the rooster present with MCA. This is the fast track procedure and is only applicable if the company has no creditors to be paid.