We come across various instances when small businesses are not able to sustain in this highly competitive era and prefer to get closed down, rather than running on losses. Many a times, startups prefer closing down a Company when the founder’s drop their business idea in view of an alternate lucrative opportunity.
The Companies Act 2013 provides various modes of closing of Companies. One of such ways is declaring the Company as “Defunct” and getting its name struck out from the records of Registrar. This is a hassle free and easy exit mode provided to Companies, which could not commence their business or are not in operations.
Eligibility to close down a Company:
- A company which has failed to commence business within one year of Incorporation.
- A company which is not carrying on any business or operation for a period of two immediately preceding financial years, and has not made any application for obtaining the status of a dormant company.
Conditions to be fulfilled before making the application:
- The Company should have Nil assets and liabilities at the time of making the closure application
- Consent of 75% of the members to be obtained by way of Special Resolution for this purpose.
- An application should be made to Registrar for removal of name in form STK 2 along with fee of Rupees 5000 and the supporting documents.
- On receipt of the application, the Registrar issues a notice to be published in the official gazette. The same notice should be placed in the website of the company, if any.
- Form STK 2 shall be digitally signed by director authorized by the board or a physical copy of the form may be signed and provided as an attachment with the form.
- The form should be duly certified by a CS, CA or CMA in Practice.
- Indemnity bond duly notarized by every director in Form STK 3
- Statement of accounts containing assets and liabilities of the company made up to a day, not exceeding thirty days before the date of application and certified by a Chartered Accountant;
- An affidavit in Form STK 4 provided by every director of the company;
- Copy of Board Resolution authorizing the filing of the Application.
- A copy of the special resolution accordingly certified by each of the directors of the company or consent of seventy five per cent of the members of the company as on the date of application
- A statement regarding pending litigations involving the company, (if any)
- Copy of order of the concerned regulatory authority, if any, approving the filing of the application
- Copy of relevant order for delisting, if any, from the concerned Stock Exchange (for listed entities)
Note: The indemnity bond and declaration as mentioned above shall be duly notarized/consularised/apostilled (as the case may be) if the director is a foreign National or a non-Resident.
Fraudulent application for removal of name: If the application in this section is made with the intention to fraud creditors or any other person, then all responsible persons shall be held liable for the loss, and be punishable for fraud and may also be prosecuted.
Appeal to Tribunal: If any person is aggrieved by an order made under this section, then he has an option of making an appeal to the tribunal. But the appeal should be made within three years from the date of order.
Nikita Bhatia is the co-founder of VenturEasy, an online platform for Company registration, book-keeping, accounting, tax consultancy and legal compliances in India. A Chartered Accountant and company secretary by profession, she has wide experience in the fields of audit, accountancy, taxation and corporate governance.