Getting a company off the ground in a competitive market is a difficult task. Additionally, businesses do not have to run according to an investor’s strategy or desire. It would be extremely difficult for a business to function if it lacked proper cash or lacked a proper management structure. Flaws like these could lead to the company’s dissolution or put it in a bad situation. In such a case, the company might consider canceling company registration.
Unlike a few years ago, the process of canceling a company registration has been simplified.
What is the Process of Winding up a Private Limited Company?
Compulsory Winding Up
The reasons behind this could be as follows:
- Debts owed by the company are unpaid.
- A special resolution approval required for the purpose of ending things.
- Unlawful conduct committed by a company or its management.
- Fraudulent act or misbehavior on the part of the Company or those under its control.
- 5 consecutive years of failure to file an annual return or financial statements with the Registrar of Companies (ROC).
- The Tribunal believes that the Company should be wound up.
Voluntary Winding Up
Here are the conditions are required for voluntary company winding up.
- The board of directors approves a special resolution to dissolve the company.
- The General Meeting of the Company should pass a resolution for company wind up. Voluntarily winding up is the result of the expiration of the period. As provided in the Articles of Association, or the occurrence of any event for which the articles of association provide that the company should be dissolved.
Fast Track Exit Scheme (FTE)
This type of winding up is used to remove the names of dissolved companies from the company registry.
- Companies that have gone out of business.
- A company that has neither assets nor obligations.
- Any company that does not start doing business after it is incorporated;
- When a company hasn’t done any business for at least a year.
Documents Required to Cancel Company Registration?
The company must cancel all active certificates, registrations, and bank accounts. Each director must sign an affidavit on stamp paper confirming the following information:
- ROC collects all ITRs and returns.
- The Company’s assets and liabilities are listed in the Statement of Accounts.
- The company’s PAN card.
- The directors of the company must notarize the indemnity bond.
- The most common bank statement of accounts for the company.
- Any business must file a Form STK 4 affidavit.
The above process should be done before the adoption of a board resolution
Companies list declared dissolved:
The STK-2 filing helps the below-listed companies to be closed:
- Companies with no liabilities on their balance sheet.
- There should be no legal action.
- There is no disagreement among the company’s shareholders or directors.
- The company was unable to begin operations within one year of its incorporation, or if it did, it had been inactive for the previous two financial years.
- Shareholders did not pay the company’s capital.
File the ROC Returns and the Company’s ITR
Our suggestion is to file all pending yearly returns and balance sheets, as failure to do so is a criminal offense with serious consequences. Though there is no requirement to attach or supply information on prior annual compliance when filing an STK-2. In terms of ITR, you, like any other tax assessee, must pay allowed taxes and file an ITR before proceeding to closure.
Who has the authority to sign a company’s winding-up petition?
The applicant’s Digital Signature Certificate(DSC) is required when filing Form STK-2 (Application for Company Winding Up). ACA, CS, or CMA is also necessary to attest the form STK-2.
How long will it take to close down the business?
Following the filing of the STK-2, the registrar may take up to two weeks to accept the application. The ROC also publishes the names of enterprises that have requested closure on their website, encouraging the general public to express their opposition to the closure. The company is wound up if the ROC receives no objections. The full process of winding up a business could take 3-5 months.
Removal of a company’s name from the Register of Companies by the Registrar?
Sections 248 to 252 of the Companies Act give the Registrar of Companies the authority to remove a company’s name from the register of companies if the Registrar has reasonable cause to believe that:
The company did not begin business within one year of its company registration. For the two most recent financial years, the company has not carried on any business or operation and has not applied for inactive status. If this is the case, the Registrar has the authority to strike the company’s name from the register of companies by sending a notice to the company and all of its directors. The notification from the ROC would state that the ROC proposes to remove the business’s name from the register of companies. It would ask the company to send representations, as well as copies of any relevant documents, within thirty days of the notice’s date.
Using Form STK-2 to remove the company name voluntarily
- The company can also start the process of removing a company name from the register of companies by filing Form STK-2.
- To submit Form STK-2, the company must have paid off all of its debts. It should pass a special resolution removing the company’s name from the register of companies. This needs to be done with the approval of 75% of its paid-up share capital members.
Closing a Company with Form STK-2
Businesses need to file Form STK-2. Registrar has the authority and responsibility for ensuring sufficient provisions. This is to realize all amounts due it and to pay or discharge its responsibilities within a reasonable time. If necessary, the ROC can also obtain essential undertakings from the company’s managing director, director, or other top management.
After the completion of the above processes, the ROC would issue a public notice detailing the company’s planned closure. After the time period specified in the notice has passed, the Registrar may strike the company’s name from the register of companies. Then publish notice of the strike-off in the Official Gazette. The publication of the notice in the Official Gazette confirms the company dissolved.
