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WHAT IS THE PROCEDURE OF COMPANY CLOSER?

WHAT ARE THE PROCEDURE OF COMPANY CLOSER?

INTRODUCTION

The procedure of closing a company in India can be either voluntary or compulsory.

Voluntary closure is when the company’s shareholders and directors decide to close the company. This is the most common way to close a company in India. The steps involved in voluntary closure are:

  1. Hold a board meeting to discuss and approve the decision to close the company.
  2. Pass a special resolution in an extraordinary general meeting (EGM) of the shareholders.
  3. File a notice of winding up with the Registrar of Companies (ROC).
  4. Pay off all the company’s liabilities, including debts to creditors, employees, and tax authorities.
  5. Distribute the company’s assets to the shareholders according to their rights and interests.
  6. Cancel the company’s registration with the ROC.

Compulsory closure is when a company is closed by a court order. The steps involved in compulsory closure are:

  1. A creditor or shareholder can file a petition with the court to have the company closed.
  2. The court will appoint a liquidator to manage the company’s affairs and assets.
  3. The liquidator will sell the company’s assets and use the proceeds to pay off the company’s debts.
  4. Any remaining assets will be distributed to the shareholders.
  5. The court will order the company to be dissolved.

Here are the steps involved in the procedure of company closer in India:

  1. Hold a board meeting to discuss and approve the decision to close the company. The board of directors must pass a resolution to voluntarily wind up the company. The resolution must be passed by a majority of the directors present at the meeting.
  2. Pass a special resolution in an extraordinary general meeting (EGM) of the shareholders. A special resolution is required to be passed by at least ¾ of the shareholders present at the EGM. The resolution must state the reasons for the closure of the company and the steps that have been taken to ensure that all of the company’s liabilities have been paid off.
  3. File a notice of winding up with the Registrar of Companies (ROC). The company must file a notice of winding up with the ROC within 30 days of passing the special resolution. The notice must include the following information:
    • The name of the company
    • The date of the board resolution and the EGM
    • The names of the directors and shareholders who voted in favor of the resolution
    • The reasons for the closure of the company
    • The steps that have been taken to ensure that all of the company’s liabilities have been paid off
  4. Pay off all the company’s liabilities, including debts to creditors, employees, and tax authorities. The company must pay off all of its liabilities before it can be closed. This includes debts to creditors, employees, and tax authorities.
  5. Distribute the company’s assets to the shareholders according to their rights and interests. Once all of the company’s liabilities have been paid off, the remaining assets must be distributed to the shareholders according to their rights and interests.

Cancel the company’s registration with the ROC. Once the company’s assets have been distributed to the shareholders, the company must cancel its registration with the ROC. This can be done by filing a final return with the ROC

ADVANTAGES

  1. It is a relatively straightforward process. The steps involved are clear and well-defined, and there are no major legal hurdles to overcome.
  2. It is relatively inexpensive. The costs involved in closing a company are typically not high, and they can be offset by the savings from no longer having to pay for things like rent, utilities, and employee salaries.
  3. It is a final solution. Once a company is closed, it is no longer legally in existence. This means that creditors cannot come after the company for debts, and the company’s assets cannot be seized.
  4. It can protect the directors and shareholders from liability. Once a company is closed, the directors and shareholders are no longer personally liable for the company’s debts. This can be a significant advantage, especially if the company has financial problems.

DISADVANTAGE

  1. It can be time-consuming. The process of closing a company can take several months, and it can be difficult to keep track of all of the paperwork involved.
  2. It can be expensive. The costs involved in closing a company can be significant, especially if the company has a lot of assets or liabilities.
  3. It can damage the company’s reputation. Closing a company can send a negative signal to customers, suppliers, and investors.
  4. It can lead to job losses. When a company closes, employees may lose their jobs. This can have a negative impact on the local economy.
  5. It can create legal problems. If the company is not closed properly, it can lead to legal problems for the directors and shareholders.

CONCLUSION

The procedure of company closer in India is a complex process that should be carefully considered before making a decision. There are both advantages and disadvantages to closing a company, and the best course of action will vary depending on the specific circumstances of the company If you are considering closing your company, it is important to weigh the advantages and disadvantages carefully. You should also consult with an attorney to ensure that you follow the correct procedures and avoid any legal problems.