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Closure of Company

Closure of Company

Closure of Company

A private limited company is an artificial judicial person and requires various compliances like appointment of Auditor, regular filing of income tax return, annual return filing and more. Failing to maintain compliance for a Company could result in fines and/or disqualification of the Directors from incorporating another Company. Therefore, if a private limited company has become inactive and there are no transactions in the company, then it is best to wind up the Company.

Voluntary winding up of a company can be initiated at anytime by the shareholders of the company. In case there are any secured or unsecured creditors or employees on-roll, the outstanding dues must be settled. Once all the dues are settled, the bank accounts of the company must be closed. Finally, the company must regularise any overdue compliance like income tax return or annual filing and surrender the GST registration. Once, all activities are stopped and the registrations are surrendered, the winding up application petition can be filed with the Ministry of Corporate Affairs.

Reasons to Winding Up of a Company

  • Avoid Compliance – A company is a legal entity and a juristic person established created under the Companies Act. Therefore, a company is required to maintain regular compliance throughout its life cycle. Winding up process can be to close a company that is not active and avoid compliance responsibilities.
  • Fast to Close – A company can also be closed by filing an application with the MCA in about 3 to 6 months. The entire process can be completed online.
  • Low Cost – When compared to maintaining compliance for a dormant company, it might actually be cheaper to wind up a company and incorporate again when the time is right .
  • Avoid Fines – A company that doesn’t file its compliance on time incurs fines and penalty including debarment of the Directors from starting another Company. Hence, it is better to officially wind up a company that is inactive and avoid potential fines or liabilities in the future.
  • Easy to Close – A company with minimal or no activities that has maintained proper compliance can be closed very easily in India. If any compliance is overdue, the compliance must first be regularized and registrations surrendered to closure of the company.

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