How can you close a Private Limited Company?

There are three ways to close a private limited company i.e. selling of the company, declaring the company as ‘Defunct’ or dissolving the company.

At times, tribunal might also order the company to close its operations. In this case it will be a compulsory closure.

Is winding up a company different from closing?

Yes, winding up and closing a company is a bit different from each other. Winding up refers to the settling of company assets and payment of all dues/debts.

Closing a company involves closing down the business entity and its operations completely which includes different methods like fast Track exit or Defunct.

What is Fast Track Exit (FTE) mode in company closure?

Any defunct company who wishes to close or wind up its operations quickly can go for a Fast Track Exit mode. As the name suggests, this is a faster way to close a private limited company.

The authorised director can apply for this mode online and sign digitally using DSC. There is a mandatory waiting period of 30 days to make sure no one objects to the closing of the company.

Upon clearing the period successfully (without objections), ROC will issue the closure certificate.

How can you sell a private limited company?

Selling a private limited company indirectly comes under voluntary winding up. In this case, you can sell the majority shareholding of the company and transfer the responsibilities of the stock to another.

What is voluntary closure of a private limited company?

Voluntary Closure is when the members of the company come up with a mutual decision to end its operations. For this, you need to pass a special resolution in the Board Meeting.

Also, a liquidator is to be appointed within 10 days of issuing the notice so that the closure can be carried successfully.

What are the reasons of closing a private limited company?

The members and creditors of the company can file for the company closure based on the following reasons –

• If ROC finds the company’s involvement in any fraudulent or unethical activities
• If the company is incapable of filing the financial statements for last 5 years.
• If the company is not able to pay to its creditors
• If the company’s management is in gridlock without any possibility of winding up.

How will the company get closed if it has no debt or creditors?

If the company has no debts or creditors, then it can directly apply for strike-off on Ministry of Corporate Affairs.