Due to the pandemic that is going on in the world, several businesses face a severe financial crisis. The number of clients is less, for which their economic growth is taking a significant dump.
Some companies cope with this problem by taking on loans from the bank; some are cutting down their staff count while some are on the verge of collapse. Banks and other financial clients are pressurizing them to pay back their money. These are the situation for almost all companies around the globe. These situations are making these companies on the verge of collapse, and in the end, the board of directors of said companies ultimately decide they should shut the company down.
How And Needs To Close A Limited Company:
A lot of work, documents, and thought are necessary before closing down a limited company. Since a company is authorized and labeled as inadequate, closing such a company is rigorous. There are several ways of closing down a company.
One such method of closing a limited company is known as winding up. It is a tedious process that can be done either voluntarily or by calling a meeting with the stakeholders and calling a resolution or court order.
Another method is known as the fast track end. This is the technique that most companies opt for. This method is done in two ways.
One is being a suo moto by the registrar. The registrar strikes off the name of Company on its own if:
- Company during the year of incorporation fails to commence any business.
- The company does not carry out any business for the next two years and is yet to obtain the status of Dormant Company.
In any two cases, the registrar sends a notice to the company regarding the matter and expects a representative from the company within the next 30 days. Even after this, there is still a liability on the directors, and the ROC can call on penalty towards the directors.
Another way of fast track end is the voluntary removal of names. The company itself can send an application to the registrar for striking off the company’s name by filing a form along with a fee. After submitting the form, the registrar has the duty to satisfy him with the company’s amount due to the company’s release of its liabilities and obligations. ROC then issues a show-cause notice in case of any errors in the returns or any other commitments. After these said work, the ROC then launches a public notice and strikes off the company name.
The fast track end method requires the company to provide several details and documents. The company has to provide the incorporation certificate, director identification number, and pending litigation proceedings (if any). They also need to give the application inform, the government filing fees, affidavit of the form, copy of the board resolution authorizing the application, statement of the company accounts showing their assets and liabilities. Also, need to give a special resolution showing the approval for the stakeholders, a copy of the order of delisting from the concerned stock exchange, and lastly, the indemnity bond.
Companies Not Allowed Filing For Voluntary Strike-Off:
- Has a name change or shifted its office from one State to another;
- Has made a disposal for its properties or rights
- Is involved in any other activity except the one which is necessary
- Has made an application to the court for any matter which has not been resolved yet
- Is being wound up in any bankruptcy law or any company act of the government.
What Happens After The Registrar Strikes Off The Company Name?
As soon as the name of the company is removed from the register, the date mentioned in the notice stops operating as a company, and the Certificate of Incorporation that was once issued to the company is declared canceled from the said date. All this can also be stopped from ever happening if the company’s amount is due by the company for the payment of its liabilities.
To Sum It Up
Companies can face a lot of tough situations and can end up in a lot of depts. Rather than sink with the ship, it’s better to abandon it. Thinking this, the board of directors and stakeholders decide to shut the company down. A lot of work goes behind closing the company. All this might seem tedious and hard to understand. Several people are there to help in all these processes.