How do I close a newly incorporated private limited company?

It is better to abandon a sinking and damaged ship than to sink with it. A business may need to be closed for many reasons that may be due to business failure or any other unavoidable circumstances.

1. Winding Up

Winding up is a tedious process and can be done either voluntary by calling up a meeting of all stakeholders and passing a special resolution or can be done on the order of Court or Tribunal. Strike Off mode was introduced by the MCA to give the opportunity to the defunct companies to get their names struck off from the Register of Companies. On 27th December 2016, MCA has notified new rules i.e. Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 prescribing rule for winding up or closure of the private limited company under companies act 2013. By releasing the form STK 2, the ministry of Corporate Affairs has brought the Section 248- 252 of 2013 act into force.

1. Fast track Exit

This is the most awaited procedure, that got active again on 5

th

April 2017. This procedure was introduced in Section 248 of Companies Act 2013.
Fast Track exit can be done in two ways:

• Suo Moto by Registrar

The registrar may strike off the name of Company on its own if:

• Company has failed to commence any business in a year of its incorporation
• The company is not carrying out any business or Activity for preceding 2 financial years and has not sought the status of Dormant Company.

The Registrar sends a notice (STK-1) of his intention to remove the name and seeks the representation of Company in 30 days. Note: Liability on the Directors of the company still exists. ROC can invoke penalty clauses anytime, and the penalty may range from INR 50K to INR 5Lakhs per director.

• Voluntary Removal of Name using Form STK 2

The company can also move an application to Registrar of Companies for striking off the name by filing form STK-2 along with a fee of Rs 5000/-. Once the form is filed, the Registrar has power and duty to satisfy him that all amount due by the company for the discharge of its liabilities and obligations has been realized. ROC can also issue a

show cause

notice in case of default in filing returns or other obligations. After above formalities, ROC issues a public notice and strike off the name of Company after its expiry. Note: The form is in approval route. Therefore, concerned ROC can ask for the completion of the fillings.

Details Required:

• Incorporation Certificate
• Director Identification Number
• Pending Litigation Proceedings if any

Documents Required:

• Application in form STK-2
• Government filing fees: INR 5,000/-
• Copy of Board resolution authorizing the filing of this application;
• A statement of accounts showing the assets and liabilities of the Company made up to a day, not more than thirty days before the date of application and certified by a Chartered Accountant
• The shareholder's approval by way of Special Resolution
• In the case of a company regulated by any other authority, approval of such authority shall also be required.
• Copy of relevant order for delisting, if any, from the concerned Stock Exchange;
• Indemnity bond in Form No. STK-3;
• Affidavit in Form No. STK-4

Note: This form must be signed by a practicing CA or CS