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Closing a Private Limited Company
Closing a Private Limited company involves legally terminating its existence and ceasing all business operations. This process is also known as winding up of a company. It may happen due to various reasons such as financial difficulties, bankruptcy, disputes between directors, or completion of the project.
To close a Private Limited company, the directors must pass a resolution for winding up and appoint a liquidator who will oversee the process of liquidating the company’s assets and paying off its liabilities.
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Overview of Closing a Private Limited Company
A company is a legal entity and a juristic person established created under the Companies Act. Therefore, a company required regular maintenance of Compliance throughout its The non-compliance of a Company leads to heavy fines and penalties and if the company is incurring heavy losses or not operating properly, then it is better to wind up the company and look for a new beginning.
Therefore, if a private limited company has become inactive and there are no transactions in the company, then it is best to wind up the Company. Generally, a company can be wind up voluntary or compulsorily. The Ministry of Corporate Affairs has introduced Fast Track Exit Mode – an easier way to close inactive companies at a cheaper cost with lesser formalities. A defunct company which has not carried out any business activity or operations for last one year or since incorporation and having NIL assets & liability can apply for striking-off of name under the Fast Track Exit Mode.
So, the key requirements for closure of private limited company are as follows:
• Ordinary resolution in the board of directors meeting.
• No business activity from the date of resolution.
• Declaration by members that there is no debt pending.
• Age of Company is more than 1 year from the date of its incorporation.
Advantages of Closing a Private Limited Company
- Legal Protection: Closing a Private Limited company provides legal protection to the directors from any future liabilities or legal disputes that may arise from the company’s operations.
- No Further Obligations: Once a Private Limited company is closed, the directors and shareholders are no longer obligated to conduct any business operations or fulfill any legal obligations.
- Avoidance of Tax Penalties: By closing a Private Limited company, the directors can avoid any potential tax penalties for failure to comply with tax regulations or filing tax returns.
- Peace of Mind: Closing a Private Limited company can provide peace of mind to the directors and shareholders, knowing that the company’s affairs have been settled and they can move on to other endeavors.
- Releasing Assets: Closing a Private Limited company allows the liquidation of assets, which can then be used to pay off creditors or distributed among shareholders.
- Saving Costs: By closing a Private Limited company, the directors can save costs associated with running the business, such as salaries, rent, and utilities.
Registration Process of Closing a Private Limited Company
Step 1: Company Review: A Legal Suvidha Business Expert will review the activities of the Company and will request you to provide the necessary information and documents.
Step 2: Document Preparation: The necessary documents are prepared by an Expert for the winding up of the company.
Step 3: Document Submission: Once the documents and procedures are done, the documents and the latest Financial statements are then filed with the MCA.
Documents Required of Closing a Private Limited Company
1. Application for Striking off of the Company.
2. Board Resolution for closure.
3. Consent of Directors.
4. Director’s Affidavit.
5. Indemnity Bond.
6. Statement of Assets and Liabilities.
FAQ's on Closing a Private Limited Company
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