Close the Pvt Ltd Company

What is the Liquidation Of the Company?

Simply put, Liquidation is the process initiated by a company to close its operations. The company may decide to wind up due to various reasons such as unwillingness to continue with the operations, insolvency and so on. As the term suggests, liquidation of a company refers to liquidating the assets of the company. By initiating the liquidation process, the company may sell its assets to meet obligations and repay liabilities.

If a company is liquidated due to bankruptcy, the liquidator can sell its assets to repay all pending liabilities. The remaining balance, if any, after repayment to the creditors, gets distributed among the shareholders of the company.

How to wind up a company?

• The winding-up of a company involves a shutdown of all business operations, transactions and selling off all company’s assets to other individuals or entities, to clear off company debts.
• Once the debts have been cleared off, the remaining assets of the company will be shared among shareholders concerning the capital invested by them
• The winding-up of the company can be executed in two different ways
  • Compulsory winding up:The compulsory winding up of a company can be executed by the order of a tribunal or a court, bypassing a special resolution made by the directors during the company’s board meeting, which proposes a court intervention. Identically, by filing a petition to a court or a tribunal by any official person of the company, if the company has indulged in any fraudulent/unlawful activities, it can be winded up compulsorily.
  • Voluntarily winding up:The company requires a resolution from the directors, to sell off all assets of the company or to transfer the stakes to another entity.

How to wind up a company?

• The winding-up of a company involves a shutdown of all business operations, transactions and selling off all company’s assets to other individuals or entities, to clear off company debts.
• Once the debts have been cleared off, the remaining assets of the company will be shared among shareholders concerning the capital invested by them
• The winding-up of the company can be executed in two different ways
  • Compulsory winding up:The compulsory winding up of a company can be executed by the order of a tribunal or a court, bypassing a special resolution made by the directors during the company’s board meeting, which proposes a court intervention. Identically, by filing a petition to a court or a tribunal by any official person of the company, if the company has indulged in any fraudulent/unlawful activities, it can be winded up compulsorily.
• Voluntarily winding up:The company requires a resolution from the directors, to sell off all assets of the company or to transfer the stakes to another entity.

What are the benefits of winding up a company?

Free from debts after liquidation: Once the liquidation process is over, the directors and all company officials are free from all creditor liabilities and pressure.

Avoiding legal action against the company:If the resolution is passed voluntarily by directors, they will neglect legal action taken by the court or the tribunal, and provide a platform to company directors to concentrate on other business opportunities.

Comparingly low cost charged for liquidation: The cost or expenses involved in the liquidation process is relatively low, as charges will be applicable on the sale of assets.

All lease agreements will be cancelled: If any company or entity has entered into a lease for a prescribed time, during the liquidation process, it will terminate all the terms and conditions of the lease. If any penalty has to be paid, it will be deducted from the sale of assets.

Advantages for creditors: After a prolonged struggle, creditors will benefit from the liquidation process as they will be eligible for a default payment, with respect to the proposition of credits given by all creditors.

How to wind up a private limited company?

Winding up of a private limited company can be done in 3 different ways. They are

• Selling company shares: By selling the majority company shares to another person or entity, the shareholders will avoid the burden of debts. Hence, voting powers, rights, and responsibilities will be laid on the acquired person or the entity.
• Voluntary wind up: Voluntary wind up can be commenced either by special resolution or a resolution taken during a general body meeting. By violating any of the terms and conditions of the memorandum of association (MOA), the winding can be executed. Similarly, due to insufficient financial funds or inability to clear the debts, a company can be winded up.

A voluntary wind up can be of two types

Members’ Voluntary Winding Up

If a company remains solvent (able to pay the debts) at the time of closure and its directors make a voluntary declaration for the same, it is termed as the Members’ Voluntary Winding Up. Such a declaration should have the following characteristics-

• It must be substantiated by an affidavit
• It must be made within 5 weeks preceding the date of the resolution passed by the company to wind up. It must be submitted to the registrar before the due date.
• A copy of the latest and audited profit & loss statement of the company ( as on a practicable date before the declaration of solvency) should accompany the declaration
• The latest company balance sheet and a statement of assets & liabilities should be enclosed with the declaration.

The following steps are necessary to carry out the process of Members’ Voluntary Winding Up-

• Solvency declaration by the directors, as mentioned above
• The statutory declaration to the Registrar
• Appointment of liquidator
• Collection of the assets belonging to the company, payment of its liabilities and distribution of the balance of the proceeds among the contributors.

Creditors' Voluntary Winding Up

if the solvency declaration is not made by the directors and submitted to the registrar, the company is presumed to be insolvent. In such a case, the creditors must meet (usually after the company general meeting) to pass the resolution for winding up and liquidation of the company.

The following steps are necessary to carry out the process of Creditors’ Voluntary Winding Up-

• The general meeting of the company passes a resolution to wind up the company operations
• A meeting of the creditors must take place
• The members and creditors must appoint a liquidator or a group of liquidators
• They must set up a committee of inspection as well
• The process of winding upstarts as per provisions of law

Procedure for voluntary wind up

• With respect to the companies act, 1961, the resolution of the board meeting is essential to start the winding up process.
• In a special resolution, a majority of 3/4th of the company shareholders should register their vote on the side of winding up the company.
• Similarly, the company’s creditors should approve the resolution made for winding up, without complications.
• The “Declaration of Solvency” should enclose outstanding debts along with the auditor report, regarding total assets of the company and it should be forwarded to the RoC (Registrar of Companies).
• Now the official liquidator will be appointed to perform the winding up process from the date of passing the resolution.
• After the resolution has been passed, the liquidator should open a bank account within a period of one month.
• In any scheduled bank, the liquidator should open a bank account in the name with, the prefix “ the name of the company” followed by “voluntary liquidation”.
• The liquidator will collect all the reliable documents and prepare a report consisting of final accounts and present this in a general meeting for approval. Here, the majority of members should pass this resolution.
• After compiling all the necessary documents, the final report will be sent to the tribunal for reference.
• After examining the credibility of the report, the tribunal will pass a decree for the dissolution of the company.
• A copy of that decree will be forwarded to RoC by the liquidator within 30 days of the order dated.
• Now the RoC will mandate the winding up of the company, and remove the name of that company from the registry.
• Simultaneously, the RoC will publish this order in the official gazette of india.
• Compulsory wind up:Any company registered in India can be compulsorily winded up by theaction of the tribunal or court, if the respective company has indulged in any fraudulent/ unlawful activities. The petition can be filed by
  • The company itself
• The Registrar of companies (RoC)
• The creditors of the company
• The central/state governments
• The contributors

Procedure for compulsory wind up

• The petition to the tribunal should be filed along with the statement of affairs, of the disputed company.
• After scrutinizing the credibility of the petition filed, the tribunal may accept or reject the aforesaid petition.
• Here, the liquidator will be appointed by the tribunal itself.
• The liquidator will execute all assets of the company, examine the book of accounts, and compile into a draft/report.
• These reports are to be forwarded to the tribunal after the winding up committee had accepted the same.

Documents required for Close the pvt.Ltd. Company

In India, Close the pvt.Ltd. Company cannot be done without proper identity and address proof. These documents will be needed for all the directors and the shareholders of the company to be incorporated. Listed below are the documents that are accepted by MCA for the online company registration process acceptable.

Identity And Address Proof

• Scanned copy of PAN Card or Passport (Foreign Nationals & NRIs)
• Scanned copy of Voter’s ID/Passport/Driver’s License
• Scanned copy of the latest bank statement/telephone or mobile bill/electricity or gas bill
• Scanned passport-sized photograph specimen signature (blank document with signature [directors only])

For the foreign nationals, an apostilled or notarized copy of the passport has to be submitted mandatorily. All documents submitted should be valid. The residence proof documents like the bank statement or the electricity bill must be less than 2 months old.

Registered Office Proof

For online company registration in India, the company must have a registered office in India. To prove admittance to the registered office, a recent copy of an electricity bill or the property tax receipt or water bill must be submitted. Along with the rental agreement, utility bill or the sale deed and a letter from the landlord with her/his consent to use the office as a registered office of the company should be submitted.

• Scanned copy of the latest bank statement/telephone or mobile bill/electricity or gas bill
• Scanned copy of Notarized rental agreement in English
• Scanned copy of No-objection certificate from the property owner
• Scanned copy of sale deed/property deed in English (in case of owned property)

Note: Your registered office need not be a commercial space; it can be your residence too.