The closure of a business/company
(Querist) 16 September 2009
This query is : Resolved
It would be great, if you share your experience on the closing formalities of a business.
Its just a 6 months old company with zero revenue/sales from the business.
Would there be complex formalities or any expenses ? How long would it take to finish the closure process ?
Thanks for the help.riven
A V Vishal
(Expert) 17 September 2009
In law, liquidation refers to the process by which a company (or part of a company) is brought to an end, and the assets and property of the company redistributed. Liquidation can also be referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation.
A company may, voluntary wind up its affairs, if it is unable to carry on its business, or if it was formed only for a limited purpose, or if it is unable to meet its financial obligation, and etc. A company may voluntary wind up itself, under any of the two modes:
Members voluntarily winding up.
Creditors voluntarily winding up.
A company may voluntarily wind up itself, either by passing:
An ordinary resolution, where the purpose for which the company was formed has completed, or the time limit for which the company was formed, has expired.
By way of special resolution
Both types of resolution shall e passed in the general meeting of the company. (484)
Once the resolution of voluntarily winding up is passed, and then the company may be wound up, either through:
Members voluntarily winding up, or
Creditors voluntarily winding up
The only difference between the abate two, is that in case of members voluntarily winding up, Board of Directors have to make a declaration to the effect, that company has no debts. (488)
MEMBERS VOLUNTARILY WINDING UP
Directors of the company shall call for a Board of Directors Meeting, and make a declaration of winding up, accompanied by an Affidavit, stating that;
The company has no debts to pay, or
The company will repay it's debts; if any, within 3 years from the commencement of winding up, as specified in declaration (488)
WHO SHALL CARRY OUT THE WINDING UP PROCEDURE? & WHAT SHALL BE THE PROCEDURE?
The Company shall appoint one or more liquidators, in a general meeting, who shall look after the affair of winding up procedure, and distribution of assets. [490 (1)]
The liquidator so appointed, shall be paid remuneration for his services, which shall also be fixed in general meeting [490 (2)]
The Company shall also give notice of appointment of liquidator to the registrar within ten days of appointment (493)
Once the company has appointed liquidator, the powers of Board of Directors, Managing Director, and Manager, shall cease to exist. (491)
The liquidator is generally given a free hand, to carry out the winding up procedure, in such a manner, as he thinks best in the interest of creditors, and company.
In case, the winding up procedure, takes more than one year, then liquidator will have to call a general meeting, at the end of each year, and he shall present, a complete account of the procedure, and position of liquidator (496)
WHEN AFFAIRS OF THE COMPANY ARE FULLY WOUND UP
The liquidator shall take the following steps, when affairs of the company are fully wound up : (497)
Call a general meeting of the members of the company, a lay before it, complete picture of accounts, wining up procedure and how the properties of company are disposed of.
The meeting shall be called by advertisement, specifying the time, place and object of the meeting.
The liquidator shall send to, the Registrar and official Liquidator copy of account, within one week of the meeting.
If from the report, official liquidator comes to the conclusion, that affairs of the company are not being carried in manner prejudicial to the interest of it's members, or public, then the company shall be deemed to be dissolved from the date of report to the court.
However, if official liquidator comes to a finding, that affair have been carried in a manner prejudicial to interest of member or public, then court may direct the liquidator to investigate furthers.
ii. CREDITORS VOLUNTARILY WINDING UP
Where the resolutiriven
Raj Kumar Makkad
(Expert) 18 September 2009
Well defined in depth by sh. A. Vishal ji. Better follow it in letter and spirit.riven
(Querist) 19 September 2009
Thanks for all your help.riven
(Expert) 21 September 2009
Well answered Mr.Vishalriven
(Querist) 22 September 2009