Winding Up of an Inactive Company
It is advised to wind-up an inactive Company to save the compliance cost burden of managing it.
Digital Filings can help you in…:
Certifying closing financial statement
Drafting Indemnity bond
Identifying and compiling the Licenses to surrender
Filing application for closure of the Company
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Understanding Winding Up an Inactive Company
An entity is a judicial artificial person created with certain business purposes. On completion of the objective or undergoing consistent inactivity, it is preferable to shut down the Company to avoid any unnecessary annual costs of compliance and / or bearing penalties for not complying with formalities. As it is a statutory identity, it is mandatory to follow the procedure as described by the law.
As per section 248 (2) under the Companies Act, 2013 a company can wind up under the following circumstances:
- No Transaction after Incorporation – If a business fails to commence its activities and unable to record no monetary transactions after obtaining the incorporation certificate.
- No Business Activities in Recent Two Years – When an active company becomes inactive and records no business activity during the recent two years.
- NIL (Zero) Assets or Liabilities – On accounting NIL assets or liabilities.
The application to wind up an inactive Company is submitted to the Ministry of Corporate Affairs (MCA) after getting an approval from shareholders and Board Directors of the Company. The winding up process varies from Company to Company and requires thorough understanding before initiating the process.
Key-Elements for Winding Up of an Inactive Company
Quick and Simple
Saving Compliance Cost
Save on Penalties
Quick and Simple
In India, the process of winding up an inactive company is quick as well as simple and can be completed within 3 to 6 months through filing an online petition with MCA.
Save on Penalties
Companies that are not maintaining regular compliance have to bear fines, while designated Directors might be prohibited to start another Company as lawful penalty.
Winding up an inactive Company is quite economical as compared to maintaining its regular compliance that are required to be furnished timely to avoid legalities.
Saving Compliance Cost
A company is a judicial person established under the Company law and required to be consistently complied with legal formalities. It is, therefore, irrelevant to spend on an inactive Company and should be shut down to save the compliance costs.
Required Documentation Chart
Required Documents for Winding Up an Inactive Company
- Scanned copies of all filed Income Tax Returns (ITR).
- Scanned copies of all filed returns with Registrar of Company (ROC)
- Indemnity bond from all Directors
- An affidavit from all Directors
- Scanned copy of the financial statement (NIL Liabilities and Assets)
- Scanned copy of Bank account closure approval
We are Glad to Help!
We @ Digital Filings suggest that Winding up of an Inactive Company is the wise decision because continuing an inactive Company for no purpose will result in an incremental compliance cost while in case the Annual Returns and ITR is not filed then the Company need to bear legal penalties.
Do Not Worry!
Experts Partners @ Digital Filings can proficiently assist an inactive Company to wind up its operations in an easy and economical way.
- Winding up an Inactive Company with only two Directors and no transactions since incorporation
- (Above price includes all taxes and relevant government fees.)
- Winding up an Inactive Company with up to four Directors and transactions of Less Than INR 10 Lacs (Above price includes all taxes and relevant government fees.)
- Winding up an Inactive Company with up to four Directors and transactions of Less Than INR 50 Lacs (Above price includes all taxes and relevant government fees.)
How we Do It…
It is preferable to close down an inactive Company in order to save time and money as well as save the designated Directors from penalties and punishments for not complying with the legal guidelines. Digital Filings Partners can help you in winding up a defunct company smoothly.
The whole process to wind up an inactive Company is quite complex and can take about 3 to 6 months.
Business Expert @ Digital Filings will review the Company’s activities to determine if it is ready for winding up and advises on the formalities.
Arranging Financial Statements
A certification regarding the closure of bank accounts needs to be collected from the banker while certification of NIL assets and liabilities is to be obtained from practicing Chartered Accountant (CA). Partner @ Digital Filings will manage and collect the required certificates for the Company to wind up.
Acquiring Indemnity Bond
The shareholders and board directors submit an affidavit stating the reliability of the provided information related to the winding up of the inactive Company. An Indemnity Bond is also submitted by the designated Directors making them liable for any future liabilities.
If the Company, that is going to wind up due to inactivity, have registered under Goods and Services Tax (GST) or procured licenses from any government department, all those need to be surrendered before an application for closure is filed by the Company. Digital Filing Experts will proficiently assist the Company to identify any such license or document.
After filing the pending ITR and other returns to the ROC, an Expert @ Digital Filings will file an online closure application along with all the required documents, digital signatures in Form STK-2, and government fee of Rs. 5,000/-.
You Should Know This Too!
Winding Up of an Active Company by National Company Law Tribunal (NCLT)
Section 272 under the Companies Act, 2013 prescribes guidelines for winding up an active Company that can shut down its operation by filing a winding up petition at NCLT. The NCLT then appoints official liquidator from among its panel of Insolvency Professionals who sell the Company’s assets, pay its liabilities, and later file a closure report. The NCLT, however, accepts the petition to wind up an active Company only in the following situations:
- Voluntarily closure by the 75% majority decision of shareholders.
- To safeguard any possible threat to the sovereignty and Integrity interests of India
- When Company fraudulently conduct its business activities
- Non-Compliance to the financial statements and / or annual return filings to the ROC
- NCLT justifies its discretion that it is fair to completely wind up the active company.
Company it Self: An active Company itself files a winding up petition when its shareholders pass a resolution, with more than 75% shareholders’ voting, in a Extraordinary General Meeting (EGM) scheduled to propose the Company’s closure.
Shareholders / Contributory: Contributors or Shareholders can also file a closure petition to NCLT in case they hold Company’s shares for at-least six months in past 18 months of the date of filing the Company winding up petition.
ROC / Central Government: ROC or Central Government can file petition to wind up a Company on any of the grounds as prescribed in section 271 of the Companies Act, 2013.
Drafting and Filing of Documents: Petition for a Company’s winding up has to be filed with an appropriate NCLT bench, along with a statement of affairs of the company and other relevant documents.
NCLT Acceptance: Mere filing the Company’s winding up petition is not enough, it has also to be accepted by the NCLT, once the petition is submitted, the notices are issued to all stakeholders and an official liquidator is appointed to take ahead the winding up process.
Appointment of an Official Liquidator: NCLT appoints an official liquidator for the Company to be wind up from among the panel of its insolvency professionals to take over the Company’s properties.
Winding up Order: The appointed official liquidator will dispose off the Company’s assets and settle its creditors’ payments. Post this, the official liquidator will file a report with NCLT for consideration, after a satisfactory review the NCLT shall pass the winding up orders.
- Petition for Winding up an Active Company, as prescribed under the section 272 of the Company’s Act, 2013
- Statement of Affairs as required under section 272 (4)
- Board Resolution approving and authorizing the petition
- Affidavit for the rectifying the petition
- Self Attested Documents of the Authorized Directors
- All Annual Returns filed with ROC
- Financial Statement of the Company
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