Company closure involves legally dissolving a business, settling debts, distributing assets, and ensuring compliance with legal requirements. It's not just about ceasing operations but also about handling every aspect correctly to avoid future complications.
Before initiating the closure process, ensure the following:
Solvency: The company must be solvent, meaning it can pay its debts in full.
Shareholder Approval: Obtain approval from shareholders through a special resolution.
Settling Liabilities: All debts and liabilities must be settled.
No Pending Legal Disputes: Ensure there are no ongoing legal disputes or investigations.
Step 1: Hold a Board Meeting
Convene a board meeting to discuss and pass a resolution for the company's closure.
Ensure all directors are notified, and the meeting is documented.
Step 2: Shareholder Approval
Obtain approval from shareholders through a special resolution.
Ensure the resolution is passed by the requisite majority as specified in the company’s articles of association.
Step 3: Notify Relevant Authorities
Inform the Registrar of Companies (ROC) and other regulatory bodies about the decision to close the company.
Submit necessary forms and documents, such as the resolution passed by the board and shareholders.
Step 4: Settle Debts and Liabilities
Pay off all outstanding debts, liabilities, and obligations.
Notify creditors and settle their claims before proceeding further.
Step 5: Dispose of Assets
Liquidate the company’s assets and distribute the proceeds among creditors and shareholders.
Follow the legal order of priority in asset distribution, starting with secured creditors.
Step 6: Prepare Final Accounts
Prepare and audit the final accounts of the company.
Ensure all financial transactions are recorded and that the final accounts are submitted to the ROC.
Step 7: Public Notice
Publish a notice of closure in the official gazette and local newspapers.
Inform the public and any interested parties about the company's dissolution.
Step 8: Strike Off or Liquidation
Based on the type of closure, either proceed with the strike-off process or liquidation.
Follow the legal process for either striking off the company from the register or liquidating its assets.
Companies Act, 2013: Governs the closure and winding-up procedures for companies in India.
Insolvency and Bankruptcy Code, 2016: Provides a framework for insolvency resolution and liquidation of companies.
Industrial Disputes Act, 1947: Requires firms employing 100 or more workers to obtain government permission for closures.