Close a Private Limited Company in India – Complete Guide

Closing a private limited company in India is a formal legal process under the Companies Act, 2013. Whether the reason is inactivity, financial unviability, restructuring, or strategic realignment, it’s essential to dissolve the company properly to avoid future compliance issues, penalties, or liabilities.

Depending on the situation, closure can be done through:

• Strike-Off (Fast Track Exit) – for dormant/inactive companies

• Voluntary Winding Up – for solvent companies choosing to close

• Compulsory Winding Up – ordered by the Tribunal for legal or fraudulent issues

When Should You Consider Closing Your Company?

You may need to close your private limited company if:

• Persistent Losses or Debt – Continued financial strain with no recovery in sight

• Insolvency – Inability to pay debts as they become due

• Outdated Business Model – No longer viable in current market conditions

• Changed Business Objectives – Shifting focus to new ventures or industries

• Restructuring – Merging, acquiring, or reorganizing business operations

• Internal Conflicts – Unresolvable disputes between shareholders/directors

• Retirement/Succession Issues – No leadership succession plan in place

• Regulatory Non-Compliance – Risk of penalties or legal action

• Inactivity – Dormancy for extended periods

• Insufficient Members – Fewer than the required number of shareholders

• Failure to File Accounts – No financial filings for over 5 years

Selling vs. Closing Your Company

Selling your company is not the same as closure but can be an alternative if you wish to exit while keeping the entity alive.

Methods to Close a Private Limited Company

1. Strike-Off (Fast Track Exit)

Section 248(2), Companies Act, 2013 – Quick closure for inactive companies.

Key Steps:

1. Board Meeting – Pass resolution to approve closure

2. Clear Liabilities – Settle debts, taxes, salaries, and close bank accounts

3. Shareholder Approval – 75% consent via EGM or written approval; file MGT-14 within 30 days

4. File Form STK-2 – Submit with fee & required documents:

   • STK-3 Indemnity Bond & STK-4 Affidavit (all directors)

   • STK-8 CA-certified accounts (within 30 days old)

   • Bank closure proof, ITR acknowledgment, IDs

5. ROC Scrutiny & Public Notice – 30-day objection period (STK-5/STK-6)

6. Final Order – ROC issues STK-7, name removed from register, company dissolved

2. Voluntary Winding Up

For solvent companies that choose to close.

Steps:

1. Special Resolution – Approved by 75% shareholders

2. Creditor Consent – Written “no objection” required

3. Declaration of Solvency – Proving ability to pay debts

4. Appoint Liquidator – Manages asset distribution

5. Final Report & Approval – Pass special resolution to dissolve

6. Tribunal Order – Apply to NCLT for dissolution order

7. ROC Filing – Final accounts and resolution submitted

3. Compulsory Winding Up

Ordered by NCLT for illegal, fraudulent, or unlawful company activity.

Process:

1. Petition Filing – By company, creditors, shareholders, ROC, or government

2. Tribunal Review – Company may be asked to submit objections and accounts

3. Liquidator Appointment – Oversees asset realization and debt settlement

4. Report Submission – Liquidator’s report reviewed by Tribunal

5. ROC Notification – Winding-up order filed within 30 days

6. Dissolution Notice – ROC removes company from register and publishes notice

Key Takeaways

• Closing a company improperly can result in penalties, director disqualification, and future legal complications.

• Each closure method has different timelines, costs, and documentation requirements.

• Professional assistance ensures a smooth, compliant, and risk-free exit.

Eligibility & Process for Closing a Private Limited Company in India

Closing a Private Limited Company in India requires meeting specific conditions under the Companies Act, 2013. The process can be carried out through Strike-Off or Voluntary Winding Up, depending on the company’s status and compliance record.

Eligibility for Closure

You can apply for company closure if any of the following conditions apply:

1. Company Never Started or Became Inactive

   • No business commenced after incorporation, or

   • No business activity for the last two consecutive years.

2. Unpaid Share Capital

   • Founders (subscribers) did not pay the promised share capital.

   • No declaration of share capital filing within 180 days of incorporation.

3. No Outstanding Liabilities

   • No pending payments such as taxes, loans, salaries, or vendor dues.

4. No Ongoing Legal Cases

   • The company is not involved in any litigation or disputes.

5. All Statutory Filings Completed

   • All ROC filings, GST returns, and income tax returns are up to date.

6. Board & Shareholder Approval

   • Board resolution passed for closure.

   • At least 75% shareholder consent.

Documents Required

1. Common Documents for All Methods

• Incorporation Documents – Certificate of Incorporation, MOA, AOA

• Financial Records – Latest audited financial statements, P&L account, audit report

• Director & Shareholder Details – PAN, address proof, shareholding details

• Bank Closure Proof – Confirmation that all company bank accounts are closed

2. Additional Documents for Strike-Off

• Board & shareholder resolutions

• Director affidavits (Form STK-4) confirming compliance and solvency

• Indemnity bonds (Form STK-3) from all directors

• Statement of Affairs (CA-certified)

• DSC (Digital Signature) for directors

3. Additional Documents for Voluntary Winding Up

• Special resolution & Declaration of Solvency

• Proof of newspaper & Official Gazette publication

• Liquidator appointment letter

• Liquidator’s progress & final reports

• Audited final accounts post-closure

Costs Involved

Typical Timelines

Risks of Not Closing Properly

Failing to close a company correctly can lead to:

• Penalties for non-compliance and late filings

• Director disqualification under Section 164

• Continued liability for debts and legal cases

• Difficulty starting new ventures or raising funds

• Negative impact on professional credibility