CLOSURE OF PUBLIC COMPANY

A company can be closed by acquiring any of the following ways:-

(A) STRIKE OFF A COMPANY UNDER SECTION 560

Section 560, of the Companies Act, 1956, deals with strike off provisions of a defunct company. Any defunct company desiring to strike off its name from the register of Registrar of company can apply for strike off its name from the register maintained by Registrar of company as per Guidelines issued vide General Circular No. 36/2011 dated 7.6.2011. Similarly, ROC also has the power to strike off any defunct company after satisfying to have reasonable cause. But before passing any order in regards to strike off, an opportunity of being heard will be provided to the defunct company as per the procedure u/s 560.

(B) WINDING UP

Section 425, of Companies Act, 1956, deals with the process of winding up.
The winding up of a company can be done either -

(a) By the Tribunal (in case of compulsory winding up)

(b) By Voluntary winding up

(C) subject to the supervision of the Court

The following steps of winding up which are summarized below (except Voluntary winding up):

• a) Issuing a written demand for debt payments to the proposed company

• b) Submit a winding up petition to the court and the company

• c) Court hearing for the petition

• d) Issuing of winding up order by the court

• e) Meeting of creditors and other relevant parties

• f) Appointment of a liquidator

• g) Comprehension and distribution of company’s assets to the creditors

• h) Realize of duties for liquidator

• i) Dissolution of the company

Voluntary winding up which may be:

• i) Member’s Voluntary winding up

• ii) Creditor’s Voluntary winding up

In case of voluntary winding up, the whole process is done without court supervision. When the winding up is complete, the relevant documents are filed before the court for getting the order of dissolution. A Voluntary winding up can be proceeding by members or creditors. The conditions in which company may be wound up voluntarily are:

• a) When the fixed period for the duration of the company in its articles has expired

• b) When an event on the occurrence of which the company is to be dissolved as per its articles happen.

• c) The company resolves by special resolution at the general meeting to be voluntary winding up.

• (a) If a company has failed to commence its business within the one year of its incorporation, or

• (b) The subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of the company, within a period of one hundred and eighty (180) days from the date of incorporation of a company and a declaration to this effect has not been filed within one hundred eighty (180) days of its incorporation;

• (c) A company is not operating any business activities or operation for a period of two immediately preceding financial years and has not made any application within such period for getting the status of a dormant company under section of 455.

An application under sub-section (2) of section 248 on behalf of a company cannot be made with the registrar of companies if, at any time in the previous three months, the company –

• (a) Has changed its name or its registered office address from one state to another;

• (b) Has made a transference for value of property or rights held by it, immediately before cesses of trade or otherwise carrying on of business, for the purpose of transference for gain in the normal course of trading or otherwise carrying on of business;

• (c) Has involved in any other activity except the one which is necessary or beneficial for the purpose of making an application under that section, or deciding whether to do so or concluding the affairs of the company, or complying with any statutory requirement;

• (d) Has made an application to the Tribunal for the authorization of a compromise or arrangement and the matter has not been finally concluded; or

• (e) Being wound up under Chapter XX, whether voluntarily or by the Tribunal.

Moreover, following categories of companies should not be removed from the register of companies under section 248 read with rule 3 and 4 of companies Rules 2016, namely:-

(i) listed companies;

(ii) companies that have been delisted due to non-compliance of regulations or listed agreement or any other statutory laws;

(iii) Disappearing companies;

(iv) Companies in which inspection or investigation is ordered and being carried out or actions on such order are yet to be taken up or were completed but prosecutions appearing out of such inspection or investigation are still pending in the Court;

(v) companies in which notices under section 234 of the Companies Act, 1956 (1 of 1956) or section 206 or section 207 of the Act have been issued by the Registrar or Inspector and reply thereto is pending or report under section 208 has not submitted yet or follow up of instructions on report under section 208 is pending or where any prosecution appearing out of such inquiry or scrutiny, if any, is pending with the Court;

(vi) Companies against which any prosecution for an misdeed is pending in any court;

(vii) Companies whose application for compounding is pending under the regulations of related authority for compounding the offences committed by the company or any of its officers in default;

(viii) Companies, which have outstanding public deposits or the company is in default in repayment of the same;

(ix) Companies having charges which are pending for satisfaction; and

(x) Companies which are registered under section 25 of the Companies Act, 1956 or section 8 of the Act.

• (i) Indemnity bond duly notarized by all directors in Form STK 3, if case any director is a foreign national or non-resident Indian, the indemnity bond, and declaration should be notarized or appostilised (as per rule 8);

• (ii) A statement of accounts containing assets and liabilities of the company made up to, not more than thirty (30) days before the date of application and certified by a Chartered Accountant;

• (iii) An affidavit in Form STK 4 by all director of the company;

• (iv) A copy of the special resolution duly certified by each and every directors of the company or mutual consent of seventy five percent of the members of the company in terms of paid up share capital as on the date of application;

• (v) A statement regarding pending litigations, if any, involving the company, in affidavit format.

1. For striking off the name of the company, a company should not have any assets or liabilities except the Capital and Asset

2. Company should conduct a board meeting and pass a resolution for striking off the name of the company and should call for the meeting of the shareholders to get their approval through Special Resolution to strike off the name of the company

3. If Extra Ordinary Meeting is not being conduct by the company, the directors need to get the consent of at least seventy five percent members in terms of paid-up share capital

4. File the E Form STK-2 along with the prescribed fee for removing the name of the company from the register of companies

5. The Registrar after receiving the application will issue a public notice in the prescribed format (as per section 248(1) read with rule 4).

6. Manner of publication of notice, As per Rule 7 of Companies (Removal of Name of Companies from Register of Companies) Rules, 2016:

   • (i) The notice under sub-section (1) or sub-section (2) of section 248 should be issued in Form STK 5 or STK 6

   • (ii) Issued on the official website of the Ministry of Corporate Affairs on a separate link established on such website in this regard;

   • (iii) Published in the Official Gazette;

   • (IV) Published the notice in English language in a leading English newspaper and at least once in vernacular language in a vernacular language newspaper, both having wide circulation in the State in which the registered office of the company is located

   Notified that, in case of any application made under sub-section (2) of section 248 of the Act, the company shall also issue the application on its website, if any, till the disposal of the application

7. The Registrar of Companies should, synchronously notified the concerned regulatory authorities regulating the company, that is, the Income-tax authorities, central excise authorities and service-tax authorities having jurisdiction over the company, about the proposed action of striking off the names of such companies and seek objections, if any, to be provide within a period of thirty days from the date of issue of the letter of intimation and if no objections are raised within thirty days from the respective authority, it shall be assume that the registrar of companies have no objections to the proposed action of striking off of the proposed company.