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Overview
Closing a private company is a significant decision that requires following a structured legal process. Companies may opt for the closure due to some financial difficulties, business restructuring or strategic reasons. Understanding the types, process and compliances is crucial to ensure a smooth exit without legal repercussions.
A private company can be closed voluntarily or compulsorily by the authorities or via winding up (liquidation) ordered by the National Company Law Tribunal (NCLT). Closure ensures that the company is legally removed from the register maintained by the Registrar of Companies (ROC) under the Companies Act, 2013. It is important to settle all liabilities, repay creditors and follow due procedure to avoid future disputes or penalties.
Types of Private Company Closure
1. Voluntary Strike-Off
- Initiated by the company’s shareholders when the business is no longer viable or required.
- Also called strike-off under Section 248 of the Companies Act, 2013.
2. Compulsory Strike-Off
- Initiated by the Registrar of Companies (ROC) due to non-compliance, inactivity or legal violations.
3. Winding Up / Liquidation
- Ordered by the NCLT when the company is insolvent or unable to pay its debts
Reasons Why Companies Close
- Continuous losses or financial unviability
- Business model no longer sustainable
- Strategic merger, acquisition or restructuring
- Retirement or exit of partners/owners
- Non-compliance with statutory obligations
- Dormant or inactive company
Eligibility Criteria for Voluntary Strike-Off
- It has not commenced business, OR
- It has not carried on business for at least one year, AND
- All liabilities to creditors and employees are cleared, AND
- No ongoing legal proceedings are pending against the company
Why Should You Choose CRSPL?
1. Detailed Guidance: CRSPL’s experts provide step-by-step assistance, ensuring you never miss important details. From eligibility criteria to required documents, they ensure you're fully informed at every stage of the process.
2. Preparation Assistance: CRSPL helps you prepare all the necessary documentation, making the application process smoother and reducing the risk of errors or missing information.
3. Application Submission: They handle the entire submission process, ensuring your application is accurate, complete, and properly formatted before submission on your behalf.
4. Follow-up Support: CRSPL offers proactive tracking of your application status, providing timely updates to keep you informed of any changes or progress.
5. Expert Consultants: If you have any business-related queries, CRSPL’s consultants are available to assist and provide expert guidance whenever you need it.
Process for Closure of a Private Company
Voluntary Strike-Off
Step 1: Board & Shareholders’ Approval
- Hold a board meeting to approve closure
- Pass a special resolution in a shareholders’ meeting
Step 2: Filing with ROC
- File Form STK-2 (Application for Strike-Off) with ROC
- Attach supporting documents such as board and shareholders’ resolutions, statement of assets and liabilities, financial statements, tax returns and NOCs from creditors/tax authorities
Step 3: Public Notice
- ROC publishes a notice in the Official Gazette
- Allows objections from creditors, authorities or other stakeholders
Step 4: ROC Approval
- If no objections, ROC strikes off the company
- The company is officially removed from the ROC register
Winding Up / Liquidation via NCLT
- File a petition with NCLT
- NCLT appoints a Liquidator to manage the closure
- Liquidator clears debts, distributes remaining assets and submits a final report to NCLT
- NCLT passes the order for closure
Documents Required
- Board resolution approving closure
- Shareholders’ special resolution
- Form STK-2 application
- Copies of Income Tax Returns and Financial Statements
- Statement of assets and liabilities
- NOCs from creditors and tax authorities (if applicable)
- Copy of MOA/AOA (if required)
Post-Closure Compliance
- Maintain financial statements, statutory records and other documents for at least 8 years from closure date.
- Directors must update personal KYC linked with DIN.
- Tax authorities or ROC may issue notices regarding pending dues.
Fees for Company Closure
- Form STK-2 filing fee: Depends on authorized capital.
- Liquidation costs: Vary depending on NCLT-appointed Liquidator and complexity of closure.
- Professional fees (CA/CS/legal advisors) vary depending on complexity and documentation.
Timeline for Closure
- Voluntary Strike-Off: Typically takes 3 to 6 months.
- NCLT Winding Up (Liquidation): Usually takes 6 to 12 months, depends on the complexity of the process.
- Compulsory Strike-Off: Generally, takes 6 to 12 months, depending on the Registrar of Companies (ROC) and compliance issues.
FAQs
Yes, but it must first honour or legally terminate all contracts with clients, vendors or partners before applying for closure.
Directors must ensure settlement of liabilities, accurate documentation, filing of forms with ROC and statutory compliance.
Normally, private companies have limited liability, so personal assets are protected unless there is fraud or mismanagement.
No. All loans, creditor claims and statutory dues must be cleared before voluntary closure.
ROC will pause the strike-off process and the company must resolve the objections before closure can proceed.
No. A Liquidator is required only for NCLT-ordered liquidation, not for small or inactive companies applying for strike-off.
Yes, the company can withdraw the application before ROC publishes the closure notice in the Official Gazette.
Directors or authorized representatives must retain financial and statutory records for 8 years as per the Companies Act.
Yes, but it must comply with RBI regulations and clear any obligations to foreign investors before closure.
Yes. Non-compliance with procedures, pending dues or misrepresentation can lead to penalties, fines or prosecution against directors.
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