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How To Close A Company By Its Promoters?

  • March 14, 2024
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A company is incorporated /registered for the purpose doing business with limited liability.  Even though a company is registered, sometimes   business cannot be taken off or carried forward  profitably for many a reasons.   In such a situation the company has to be closed legally so as to end the responsibility of promoters with respect to the legal compliances associated with the registered company.

There are two methods  by which company can be closed by promoters:

(i) by filing petition  to the National Company Law Tribunal  and

(ii) by filing application to Register of Companies ( ROC). 

If a registered company cannot function profitably and it has  substantial  assets & liabilities,  the promoters of the company , after passing  a special resolution to close the company ,  can approach  the National Company Law Tribunal to close the company by  filing petition for winding up.    This  method is seldom used  by promoters  to close a company  as it involves lengthy and costly  procedures.

If  a registered company cannot function profitably  and it has  meagre  or  no assets & liabilities , the promoters of the company  

(i)  after extinguishing all the  liabilities  of the  company and

(ii) passing   special resolution  , can apply to the Register of Companies ( ROC)  to close the company  by way of strike off the name of the company from the register of companies maintained  by  ROC.  This method of closing is very popular and generally resorted to by promoters to close companies.  

If for any reason the   functioning of  a company cannot be carried on , it is always  advisable to  close it without  delay  to  avoid unproductive  expense to keep the inactive company  alive  and also to avoid legal obligations and consequences  for being associated  with the company.