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Closure of Public Limited Company

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  • Overview
  • Reasons
  • Benefits
  • Procedure
  • Documents
  • Closure Fees
  • FAQs

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

These documents are required for the public limited closure: Application for Striking off of the Public Company. Board Resolution approving the closure. Consent form of Directors. Director’s Affidavit. Indemnity Bond. Statement of Assets and Liabilities. Form Fast Track Exit (FTE) (in case the FTE scheme is being applied under). Up to Date Forms 8 & 11.

A Public Limited Company should be the preferred business choice in India if you plan to raise funds from the general public through an Initial Public Offering ("IPO") because Public Limited Companies have come under the Securities Laws to get the capital market.

The following can be a reason for winding up a Company: The Company may be not able to pay its debts and loans After the tribunal orders the company needs to be closed or believes that the Company is equitable and must be shut down If the company does not file the financial statements or annual returns in the previous five consecutive years. If the company has acted against the sovereignty and integrity of the state and India, friendly relations with foreign states, public order, decency or morality If the company has been involved in fraudulent manners or is guilty of fraud or misconduct

These are the benefits of a private Limited company: A Public Limited company can transfer their ownership with other members of the Company. It can easily transfer its shares with some compliance requirements under the Companies Act of 2013. 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. The shareholders (members) and directors of a public limited company enjoy the benefit of a separate legal entity. 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. A public limited business is closed; you don’t need to raise money from individuals and financial institutions.

If you want to know the closure of a public limited company then refer to the process of this web page. In this web page, we have provided all the information about the closure of a Public Limited company including its Procedure and benefits. You need to visit the ApkaTax website to get more information about the closure of the companies.

PLC stands for Public Limited Company and should be the most popular business category in India. If you want to raise funds from the general public through an Initial Public Offering ("IPO") then Public Limited Company is the best choice for you. It has been privileged under Securities Laws to access the capital market.

These are the benefits of a public limited company closure: 1. It helps you to save compliance costs 2. You don’t need more directors in default 3. Closing a public limited company, you can protect yourself from non-compliance penalties 4. It will protect you from unwanted IT demands 5. No more headache of keeping records

Voluntary closure means when you close the company voluntarily. By discussing with all directors and members of the company.

Compulsory closure means when the company committed any fraud must be closed compulsorily. For this, you need to close the company with a fast-track procedure that needs the 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.

These are the steps involved in voluntary closure: Step-1: Hold a Board Meeting Resolution Step 2: Release the notice of Extraordinary General Meeting Step-3: Special Resolution at EGM Step-4: Notify Registrar of Companies Step-5: Gazette Notification Step-6: Advertise in the Local Newspaper Step-7: Statement of Assets and Liabilities

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