Closure of Public Limited Company

What is Closure of Public Limited Company?

Registering as a public limited company in India is the most popular entity for business owners as it connects with a large number of people. In this, there is a minimal need of seven members to run a company and there is no limit to a maximum number of shareholders or members to form a Public Limited Company in India. By registering as a Public limited company, you can avail various benefits and rights of a corporate body. Running a business comes with its various challenges. Sometimes when things do not work out a business can be shut down.

There can be several reasons to close or wind up the Public Limited Company. The process of closing a is also known as company closure or Strike-off. Public Limited company closure comes under the new notify rules Companies (Removal of Names of Companies) Rules, 2016 which is governed by section 248 of the Companies Act, 2013.

What is Closure of Public Limited Company Reasons?

• Easy To Transfer Shares: A Public Limited company can transfer the shares with the consent of other members of the Company. However, a Public limited company can easily transfer its shares with some compliance requirements under the Companies Act of 2013.
• The Opportunity of the Loan: When it comes to taking a loan from banks and other institutions, in this case, a public limited company gets a loan rather than a private limited company. A public limited share has the extra benefit of providing a credible identity in the market.
• Separate Legal Identity: The shareholders (members) and directors of a public limited company enjoy the benefit of a separate legal entity. 
• Shares can be recorded on the stock exchange: A public company can record its shares on a stock exchange. When listing its shares on a stock exchange the company needs to comply. The public Company might raise secondary financing using this approach. Therefore, a potential applicant must consider those mentioned above when registering a public limited company.
• Various Financing Sources: A public limited business is closed; you don’t need to raise money from individuals and financial institutions.
• Growth Opportunities: With a strong financial base and open structure, there's sample room for organisational growth.
• Management: The Board of Directors is in charge of the Company. The investors choose this Board of Directors.

What is Closure of Public Limited Company Benefits?

1. It helps you to save compliance costs
2. No more Director in default 
3. Saves you from non-compliance penalties 
4. It will protect you from unwanted IT demands
5. No more headache of keeping records

What is Closure of Public Limited Company Procedure?

There are two ways to close a Public Limited Company 

Closing a company voluntarily is a long process of compliance to follow. Following are the compulsory requirements that have to be finished to shut down a company voluntarily. Voluntary closure can be done in this situation that is given below: 

Voluntary Closure

Voluntary closure is a time-consuming and long compliance process to follow. There are various requirements needed to close a public limited company voluntarily. You can close your company voluntarily by following these steps: 

• Step-1: Board Meeting Resolution: You must discuss and approve the closure of the public limited decision.
• Step 2:Notice of Extraordinary General Meeting (EGM): You need to  arrange for the EGM to notify all shareholders about the closure, where a special resolution for closure will be passed.
• Step-3: Special Resolution at EGM: You need to pass a special resolution to close the public limited company. 
• Step-4: Notify the Registrar of Companies: You need to request the appointment of an Official Liquidator by informing the Registrar of Companies.
• Step-5: Gazette Notification: You need to provide the information of the closure in the Official Gazette.
• Step-6: Advertisement in the Local Newspaper: You must advertise the closure in a local newspaper where the company is registered.
• Step-7: Statement of Assets and Liabilities: You need to file a specific statement of the company's assets and liabilities at most thirty days.

The company needs to make a Declaration of Solvency for voluntary closure. Get the acceptance of the company closure from the trade creditors and then appoint the liquidator. 

Compulsory closure 

Companies registered under the Company Act 2013 and committing fraud must be compulsorily closed. A Defunct or Dormant Company can wind up with a fast-track procedure that requires submission of the STK-2 form. When a tribunal or court issues an order it can be closed according to the special resolution proposed by the company director in a board meeting. You need to follow the given below process for compulsory closure:

• The Public Limited Company needs to file a petition with the tribunal and present its statement of affairs. 
• A company needs to appoint a liquidator to proceed with the process of public limited company closure.
• A liquidator must draft a report and need to wait for approval. Your report must be submitted to the tribunal when the approval is received. 
• If the ROC verifies your report, they will approve the process of company closure and strike of the company name from the registered companies. 
• At the end, the Registrar of Companies (ROC) will send a notification for the report's publication to India's official gazette. 

For this scheme, a defunct company refers to a company that has:

• No asset and no liability, and
• Which has not commenced any business activity after its incorporation or
• Has not been carrying on any business activities since last year before making an application under FTE (Fast Track Exit Scheme).

To close a company you need to fill the Form STK 2 along with the prerequisite of government fees and upload the necessary document. However, it’s essential to follow these steps for the company closure: 

• Pay all Liabilities: You need to pay all the liabilities of the company and ask for a written No Objection Certificate from them. If you have not established your business then you don’t need to follow this clause. 
• Need 75% Consent: If you want to close your company then it’s necessary to get at least 75% consent of the shareholders/members of the company. One director of the company needs to be notified to take responsibility for closing the company. 
• Prepare Application: You need to prepare the application and file the same with the ROC.

What is Documents Required for Closure of Public Limited Company?

• Application for Striking off of the Public Company.
• Board Resolution approving the closure.
• Consent of Directors.
• Director’s Affidavit.
• Indemnity Bond.
• Statement of Assets and Liabilities.
• Form Fast Track Exit is required when the FTE scheme is being applied 
• Up to Date Forms 8 & 11.

What is the Public Limited Company Closure Fees?

FAQs