Are you thinking of your company closure? Read to know the legal formalities that need to be done for the same.
The process of company closure is the process of bringing the organization’s existence to an end. The firm’s property is managed for the advantage of its creditors and members throughout the winding-up process. Closure of company procedure can be launched willingly by the shareholders or compelled by a tribunal or a court by providing legal Notice. Let’s look at it more closely.
How Does a Company Close?
The liquidation of a company’s assets acquired and liquidated to pay off its debts is known as closing a company. The liabilities, costs, and charges are paid off first when a company ends up. Then the remaining assets are distributed among the shareholders is what closing a company means.
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The Company Is Officially Dissolved and Ceases to Exist After Liquidating It
The legal process of winding up a firm and ceasing all operations is known as winding up. The company’s existence comes to an end after it is wound up, and the assets are managed to ensure that the stakeholder’s interests are not harmed.
The company’s shareholders can initiate the company’s closure at any time by giving legal notice. After the debts have been settled, all of the company’s bank accounts must be closed. In the event of a company’s closure, the GST registration must also be surrendered.
The application petition can be filed with the Ministry of Corporate Affairs once all of the registrations have been relinquished. In general, the corporation can be wound up in one of two ways:
- Compulsory closure of a company
- Voluntary closure of a company
Legal Notice for Company Closure
Closure of a company occurs when a company created and established under the ordinance is ordered to be wound up by a court or Tribunal. The Tribunal may wind up a company in certain circumstances. Compulsory closure is only feasible in the following circumstances, according to the Companies Act of 2013:
- When the corporation has passed a special resolution directing the Court or Tribunal to wind up the firm.
- Has acted detrimental to the country’s sovereignty and integrity.
- For the past five years, the company has failed to file its financial statements or annual returns.
- The Tribunal or Court considers that the firm is operating fraudulently or that the corporation was formed for a fraudulent/illegal purpose.
- The Tribunal or Court believes that the closure of the corporation is just and equitable.
You can also go through the Legal Heirship Certificate From Court
Persons Eligible to File a Petition With the Tribunal
A petition for the closure of a firm must be filed, and the following individuals are permitted to file such a petition:
- The company
- The creditors are owed money
- Contributors or contributions of any kind
- The registrar’s office
- Any person who has been granted permission by the central government
- Any person who has been granted permission by the state government
Other relevant considerations:
- Before presenting the Petition for the company’s closure, the registrar must first acquire prior approval from the Central Government. Furthermore, the Central Government must provide the company with a reasonable opportunity before issuing such permission to the registrar.
- The registrar will also receive a copy of the appeal, and he will have 60 days to submit his comments to the Tribunal after receiving it.
Actions Taken by the Tribunal Upon Receipt of the Petition
The Companies Act of 2013 further specifies what action the Tribunal will take once the application for the company’s closure is received.
The Tribunal would issue one of the following orders after receiving the Petition:
- Reject the proposal (with or without cost)
- Make a temporary arrangement as it sees fit
- Appoint a preliminary liquidator for the company until a winding-up order is issued
- Pass an order for the corporation to be wound up (with or without fee)
- It may pass any other order it sees fit
- The Tribunal has 90 days from the time of submission of the Petition to issue an order
- Before designating a provisional liquidator, the Tribunal must provide the company with a legal notice and a reasonable opportunity to be heard
- If the Petition for the business closure has been filed by someone other than the firm, the Tribunal will order the company to file an objection to the Petition, along with the account of affairs, within 30 days
- The liquidator is expected to file the company’s books of accounts (finished and inspected up to the order date) with the director and other officers.
Procedure for Compulsory Company Dissolution
- The first stage is to file a petition for the closure of a firm, which, as previously stated, can only be done by certain types of people.
- The Petition, when filed, must be supported by the Company’s Statement of Affairs.
- The following is how the Petition should be advertised:
- The announcement must be made in accordance with Form 6.
- The advertisement should run for at least 14 days in a daily journal.
- The announcement should be written in both the regional tongue of the area and in English.
- The business must produce fully audited books of accounts. Suppose the Tribunal decides that the business’s accounts are in order and that all of the company’s mandatory compliance requirements have been met. In that case, the Tribunal will issue an order dissolving/closure the company.
- Following the Tribunal’s order, the registrar will publish a notice announcing the company’s dissolution in the official gazette.
A corporation can be ended for various reasons, but it is not as simple as shutting the door to its offices or failing to show up for work. The procedure of closing is far more time-consuming than the organization itself. To start with the procedure, you should have an experienced professional on your side to Send a legal notice.
At the very least, it’s a fantastic way to be prepared when the time comes. Vakilsearch has a set of experienced experts who can help you attain all the information you need about legally closing your company. Contact us to know more!
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