Clipped from: https://www.financialexpress.com/industry/sme/msme-eodb-winding-up-business-heres-a-quick-guide-on-how-to-close-a-company-in-india/3041393/
Ease of doing business for MSMEs: In winding up voluntarily, the company voluntarily decides to shut the business after clearing off all its liabilities and ensuring that it hasn’t committed any default.
Winding up involves the closure of all business operations and clearing off the company’s debts by selling its assets.
Ease of doing business for MSMEs: Winding up or closing a business could be as daunting as registering it for first time entrepreneurs. It involves the closure of all business operations and clearing off the company’s debts by selling its assets. The remaining assets, if any, after clearing the debt, are shared among shareholders concerning their investments in the company.
A company can be closed in two ways: first, compulsory wind up by striking off the company name under the Companies Act, 2013 if it hasn’t started the business within one year of its incorporation or hasn’t carried out business for two immediately preceding financial years to become a dormant company or if there is any unlawful or illegal activity by the company, etc. The second is voluntary wind up wherein the company voluntarily decides to shut the business after clearing off all its liabilities and ensuring that it hasn’t committed any default.
Also read: Step-by-step guide: How to register your MSME on Udyam portal for free
Unless you have been mandated to shut the business, here’s how you can close the business if it is likely to become unviable ahead:
- A resolution has to be passed by the company in a general board meeting seeking consent from the majority of its directors
- A special resolution seeking approval of three-fourths of its shareholders has to be passed
- Consent is needed from trade creditors that they don’t have any responsibility if the company is closed
- As a private limited company, a Declaration of Solvency has to be prepared and accepted by the trade creditors
- Get a liquidator to implement the procedure to wind up the business and also to prepare a report on assets, debts, and properties
- The report has to be shared in the general meeting and a resolution has to be passed for dissolving the company
- The liquidator will make an application to the National Company Law Tribunal (NCLT) for dissolving a company
- The tribunal then may pass the dissolution order within 60 days of verifying the documents submitted
- After the dissolution, the company should file a copy of this record with the registrar of the company.
Also read: OPC vs LLP vs sole proprietorship: Which legal structure to opt for to register your company; check details
Among the documents required to close the company would be the board resolution, special resolution, affidavit from the directors, indemnity bonds, statement of Affairs of the company. other documents such as incorporation certificate, company PAN, director’s PAN and Aadhaar, last utility bill, copy of articles and memorandum of association, GSTR-10 filed acknowledgement paper, ITR filed acknowledgement paper, letter of bank account closure, bank statement, etc.
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