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.