Monday, 6 March 2017

Ultimate Guide to Wind-up a Private Limited or One Person Company

There are many companies that are incorporated under Companies Act 2013 and consequently it is mandatory to follow its legal compliances as well. But there are times when business becomes inoperative or defunct during the course of running such business due to one or the other reason or has been inoperative since its incorporation. Non-fulfilment of legal compliances within the time prescribed attracts numerous fines and penalties, including prohibition imposed on the directors from starting another company.

It is preferable to close or wind up such company to ensure both cost and time saving by following certain set of legal procedures as prescribed by The Ministry of Corporate Affairs. In order to ease such complex procedure of winding up of company, Ministry has decided to modify the existing route by launching new rules viz. Removal of Names of Companies from the Register of Companies, Rules 2016 applicable from date of publication in the Official Gazette for easy closure of Private Limited or One Person Company with less legal formalities.

It usually takes 25 to 30 days to wind up an inoperative/defunct company and get its name struck off from Register of Companies maintained by Registrar of Companies. Forms which shall be filed for the purpose of Winding up or Closure of Companies shall be certified by a Chartered Accountant in whole time practice or Company Secretary in whole time Practice or Cost Accountant in whole time practice, as the case may be.
For removal of names of companies from the Register of Companies, following set of conditions must be satisfied –

1.      the company has failed to commence its business within one year of its incorporation; or

2.    the company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455; or

3.     the company has filed an application under sub-section (2) of section 248 for removing the name from the register of companies on the grounds mentioned in sub-section (1) of section 248.

Section 248 (2) – Power of Registrar to remove name of company from register of companies

Without prejudice to the provisions of sub-section (1), a company may, after extinguishing all its liabilities, by a special resolution or consent of seventy-five per cent members in terms of paid-up share capital, file an application in the prescribed manner to the Registrar for removing the name of the company from the register of companies on all or any of the grounds specified in sub-section (1) and the Registrar shall, on receipt of such application, cause a public notice to be issued in the prescribed manner:

Provided that in the case of a company regulated under a special Act, approval of the regulatory body constituted or established under that Act shall also be obtained and enclosed with the application.

Section 249 (1) – Restrictions on making application under section 248 in certain situations

An application under sub-section (2) of section 248 on behalf of a company shall not be made if, at any time in the previous three months, the company—

(a) has changed its name or shifted its registered office from one State to another;

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

(c) has engaged in any other activity except the one which is necessary or expedient 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 sanctioning of a compromise or arrangement and the matter has not been finally concluded; or

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

Following categories of companies shall not be removed from the register of Companies under this rule –

1.      listed companies;

2.   companies that have been delisted due to non-compliance of listing regulations or listing agreement or any other statutory laws;

3.      vanishing companies*;

4.    companies where 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 arising out of such inspection or investigation are pending in the Court;

5.     companies where 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 yet been submitted or follow up of instructions on report under section 208 is pending or where any prosecution arising out of such inquiry or scrutiny, if any, is pending with the Court;

6.      companies against which any prosecution for an offence is pending in any court;

7.   companies whose application for compounding is pending before the competent authority for compounding the offences committed by the company or any of its officers in default;

8.   companies, which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;

9.      companies having charges which are pending for satisfaction; and

10.  Companies registered under section 25 of the Companies Act, 1956 or section 8 of the Act.

Any application or pending proceeding for striking off or Form-FTE filed with the Registrar of Companies prior to the commencement of these rules but not disposed of by such authority for want of any information or document shall, on its submission, to the satisfaction of the authority, be disposed of in accordance with the rules made under the Companies Act, 1956 (1 of 1956).

* “Vanishing Company” means a company, registered under the Act or previous company law or any other law for the time being in force and listed with Stock Exchange which has failed to file its returns with the Registrar of Companies and Stock Exchange for a consecutive period of two years, and is not maintaining its registered office at the address notified with the Registrar of Companies or Stock Exchange and none of its directors are traceable.

Do not miss our next update on Latest Amendments.

You may drop in your queries at or directly get in touch with our finance/tax experts @ 8872032114, 8872032116, 8872013116

Some recent updates that you would not like to miss –

1.   In case of continuous supply of services, the time of supply shall be the due date of payment, if ascertainable from the contract. If not ascertainable, it will be earliest of date of receipt of payment or the date of issue of invoice or completion of event where payment is linked to completion of event.

2.    Input Tax Credit can be taken up to the month of September of the following Financial Year to which invoice pertains or date of filing of annual return, whichever is earlier.

3.    GST council is likely to retain a clause in the law that will require service providers to register in every state where they operate, despite recent representations.

4.      If payments are made after three months of the date of the invoice of the supplier then the proposed GST Legislation appears to deny tax credit in relation to input services for such payments.

5.    The government has asked all banks to provide mobile banking facility to all customers by March 31 in a bid to push digital transactions.

6. Due Date for E-payment of Service tax for the month of February by Companies: 06.03.2017 and Payment of TDS/TCS deducted/collected in February: 07.03.2017.

7.      100% penalty shall be imposed on person accepting cash for more than Rs.3,00,000/- for accepting it. No such penalty shall be imposed on cash payer.

Have a great day ahead!

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