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How to close a Private Limited Company in India

A private limited company is an entity managed by some owners. These owners are shareholders of the company. Both the company and the shareholders have different identities. A Private limited company is regulated by the Companies Act, 2013. The name is a private ‘limited’ company. Hence, in case of any liability, the shareholders are not liable to pay anything from personal assets. There should be at least 2 directors and shareholders in a private limited company. The shares of this company are not bought/sold on any stock exchange in India.

There are various reasons to close a private limited company. Some of them are listed below:

• Financial problems 
• Merger and acquisition activity 
• No successor of the business
• Change in top management 
• Non-compliance 

A private limited company can be closed in the following ways:

• Sale of company – This is not an actual closure. There is only a change in shareholders.
• Striking off by company or Registrar of Companies (‘RoC’) – The company or RoC can initiate removing the company’s name from MCA records. The company then loses its identity.
• Voluntary winding up and Compulsory winding up - Winding up is when a company is dissolved. Its assets are liquidated to pay off creditors and distribute any balance assets to its shareholders.

Documents and Step-by-step process to close a private limited company

Strike off by Company 

• Pre-step: The company must ensure that it has filed all financial statements and annual returns up to the end of the year in which it stopped business operations. Only after this step can the make an application for strike-off. 
• Step 1: The company has to get the approval of board members to strike off the company’s name from RoC records.
• Step 2: The company has to clear all outstanding payments and obligations. 
• Step 3: The company has to conduct an Extraordinary General Meeting (EGM) of shareholders. Shareholders need to pass a special resolution at the meeting. Special resolution means approval of at least 75% of shareholders in terms of paid-up capital. 
• Step 4: The company has to file an e-form MGT-14 with the RoC within 30 days of passing the special resolution. This form should be accompanied by a copy of the special resolution.
• Step 5: The company has to then file an e-form STK-2 with RoC. This form is the application for striking off the company name. The fee for filing this form is Rs 10,000.  The following documents are to be attached while filing this form:
  • Form STK-3 - Notarised Indemnity bond
  • Form STK-4 - Notarised Affidavit by every director
  • Form STK-8 - Statement of Accounts certified by a Chartered Accountant not more than 30 days before the date of application
  • No Objection Certificate (NOC) from authorities, if applicable
  • Copy of Board Resolution 
  • Copy of Special Resolution 
• Step 6: Once RoC is satisfied, it will publish a notice in the Official Gazette and two newspapers. This is to invite any objections from the public. RoC waits for objections for 30 days.
• Step 7: If there are no objections, the company will be struck off from the register. RoC will publish notice of dissolution in the Official Gazette and MCA website. 

Some companies fulfilling prescribed criteria are restricted from filing a voluntary application to strike off their name.

Voluntary winding up

• Step 1: The majority of directors of the company will submit a declaration with an affidavit. The declaration should also have audited financial statements and record of the company’s business operations for the last 2 years and a valuation report, if any. The declaration should state that:
• The company has no debts. In case of debts, the company will settle all the debts from the proceeds of the assets sold in liquidation. 
• The winding-up process is not done to defraud anyone.
• Step 2A: Company has to conduct a general meeting of the shareholders within 4 weeks of the above declaration. A special resolution shall be passed to voluntarily liquidate the company and appoint an Insolvency Professional (IP) registered with the IBBI to act as a Liquidator. 
• Step 2B: If the company owes debts to creditors - Company to conduct meeting of the creditors within 7 days of special resolution. Approval of 2/3^rd creditors in value is required to voluntarily wind up the company. 
• Step 3: The company shall then inform the RoC and the IBBI about the resolutions passed by the board members/creditors. This must be done within 7 days of passing the resolution.
• Step 4: The Adjudicating Authority passes an order for winding up of the company/liquidation and appoints the liquidator. The liquidator takes full responsibility for all assets. The powers of the board of directors are removed. 
• Step 5: Liquidator undertakes the following steps:
  • Makes a public announcement for claims;
  • Accepts or rejects the claims within 30 days last claim date;
  • Prepares a list of stakeholders;
  • Inform about all the preferential, fraudulent transactions to the Adjudicating Authority;
  • Value the assets and sell them;
  • Distributed assets to all the stakeholders within 6 months of realising the amounts after adjusting the costs incurred by the liquidator;
  • Make an application to the Adjudicating Authority for dissolution.
• Step 6: The Adjudicating Authority passes an order for dissolution.

Also Learn: ROC Compliance For Private Limited Company

How FileAbhi.Com can help you in the closure of a private limited company?

We provide end-to-end services to close a private limited company in a smooth and compliant manner. Our team has experts in the voluntary strike-off process, dissolution process, account preparation, documentation, etc. 

We will help you in each step to ensure compliance with all regulatory requirements. We also liaise with relevant authorities. Contact FileAbhi.com to help you close your private limited company. 

FAQ Section

1. What happens if we don't close a private limited company?

There are provisions under the Companies Act, 2013 and Insolvency Bankruptcy Code, 2016 in which a company can be compulsorily struck off or wound up by the authorities.

2. How much time does it take to close a private limited company?

Under striking off, it takes 3 to 6 months to close a private limited company. Under voluntary winding up, it could take anywhere from 8 months to a year. 

3. How much does it cost to close a private limited company in India?

It may cost around Rs. 30,000 to close a private limited company in India including professional charges.

4. Who can close in a Pvt Ltd Company India?

The shareholders can close a private limited company. In cases where a private limited company does not fulfill certain conditions, RoC may also initiate the closure of such a company.