Running a business comes with several challenges, and a business may have to shut down suddenly when things do not work. Several reasons may be behind the closure of a business. Businesses may close in the following manner.
A company may wind up voluntarily
Businesses may be forced to shut down
Closure of defunct companies
Owner may sell the business
Selling the company
A company may decide to sell its assets and it can do so by selling the shares or the majority shareholding of the company. It may not be closure of the business in the real sense, but the stakes are to be transferred to another entity or individual, and the primary shareholder no longer holds the stocks and the responsibilities.
The companies in this country registered under the Companies Act may have to close compulsorily when they commit unlawful acts or resort to actions that are fraudulent. Read the following points to know the procedure for closure.
Filing a petition
It is necessary to file a petition after consulting with the corporate lawyers in India and the following can exercise the right of filing a petition.
Trade creditors of the company
Contributions of the company
State or Central Government
Registrar of the companies
Petition must accompany the state of the affairs of the company
The documents included with the petition must be audited by a practicing Chartered Accountant and the opinion of the auditor is important. The petition should be advertised in a newspaper for about a fortnight and the language must be regional and English. It must be carried out under Form 6.
Moving the tribunal
You will require Form 11 for completing the formalities of closure. You have to consult lawyers in India to track the procedural formalities for closing the company. The following are the procedures to be carried out as part of the tribunal.
Submission of the accounts statement that are completely audited to date.
Providing the time, date, and place for the liquidator.
Surrendering the assets and the documents related to it.
When the tribunal finds out that the accounts of the company are updated and completed, and all the other compliances are satisfied, it can pass the order for the dissolution of the company. The procedure may be completed within sixty days of receiving the application. As soon as the tribunal passes the order, the registrar can issue a notice to the authorities stating the dissolution of the company.
Steps for voluntary closure
When a company decides to wind up voluntarily, the following steps are to be followed.
It is necessary to convene a meeting with one or two Directors of the company or a majority of Directors. Furthermore, a resolution is to be passed after the Directors declare that the company has no debts from the proceeds of the assets sold as part of the decision to wind up voluntarily. It is also essential to fix a time, date, and place for convening a General meeting of the company about five weeks after the Board meeting.
Issuing notice in writing for calling the General meeting of the company in which the proposal to dissolve the company is to be put forth along with suitable explanations. Consulting corporate lawyers firm in India can help the companies strengthen their decision to dissolve. A resolution about the decision to dissolve the company is to be passed by the majority of the attendees in the General Meeting or about three-fourth of the members must adopt a special resolution. The procedure to wind up the company must begin from the date of passing the resolution.
After the General Meeting, another meeting is to be held with the creditors for dissolving the company. If the company fails to meet the liabilities, then the company can be easily dissolved by the tribunal.
After ten days of passing the resolution, a notice is to be filed for appointing a liquidator and within a fortnight of passing the resolution, an advertisement is to be given in the daily journal for circulation of the copies in the district of the registered office of the company.
A final General Meeting is to be held to file a copy of the accounts and also to file an application to the Tribunal for passing an order for the dissolution of the company.
When the registrar receives a copy of the order passed by the tribunal, the dissolution of the company is declared.
Dissolution of a defunct company
A company gains the status of defunct according to the Companies Act. When such companies decide to wind up, certain assistance or relief comes from the government of this country as no financial transaction takes place between this company and the rest. Usually, these companies dissolve through a fast-track procedure which requires the submission of the STK-2 form. This form is to be filled with the Registrar of Companies, and it is to be duly signed by the Director of the company. The corporate lawyers in India can offer the best guidelines to these companies before they decide to wind up and follow the procedures related to it. The defunct companies do not have any assets or liabilities and do not commence business activity after its registration.
The companies must follow the legal steps in the properly before the final dissolution.
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