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Attention – Companies & Directors of Companies Which Are Not Carrying on Any business or Running Their Business at Los

There are some situations in which directors of a company may have one of the several options to Close it down or apply for a status of a Dormant Company.

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Attention – Companies & Directors of Companies Which Are Not Carrying on Any business or Running Their Business at Los

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  1. Attention – Companies & Directors of Companies Which Are Not Carrying on Any business or Running Their Business at Loss | closing a ltd company

  2. This a part of bringing good governance in the country, Government of India is now on the way to enforce strict compliance of law on all the companies and it may impose huge additional fees and penalties which may even lead to imprisonment to officer in default which includes Directors. The Recently implemented Companies Act, 2013 has brought about a number of stringent provisions for its implementation in a legible manner. There are some situations in which directors of a company may have one of the several options to Close it down or apply for a status of a Dormant Company. Those include: Directors of the company not able to run the business in a profitable manner. Business conditions are not favorable and the company does not have many funds to sustain. The company has suffered huge loss due to accident or natural calamity or any other reason which is neither recoverable nor sustainable. Government support is very nominal to sustain in the industry. Though directors may have some other options such as go for the revival of the company, restructuring, infusion of funds, however, if such other options are not feasible or not available or not sufficient for revival, the last option available to the company is to CLOSE IT DOWN or Apply for a status of a Dormant Company. The Practical View of closing down or obtaining Dormant Status is given below: CLOSING A LTD COMPANY: Under which enactment, Company may be closed? Section 560 of Companies Act, 1956 and General Circular 36/2011 (The procedure collectively called as Fast Track Exit Mode) As section under Companies Act, 2013 which prescribes the procedure to close a company is described is not yet notified, therefore, the old procedure under 1956 Act is in force. ELIGIBILITY FOR APPLYING FOR FTE MODE? Defunct Company: Company which has Nil assets and liabilities Not commenced any business or activity since incorporation or Not carrying on any business operation since last one year Defaulting Company: A company which does not file the annual returns and/or annual financials for any financial year(s) PROCEDURE TO BE ADOPTED: Close all bank accounts, Cancel all Registrations with the govt. authorities Hold a Board Meeting and get closure of company approved Get Notarized Affidavits from all directors (in Annexure A), Indemnity from all Directors (in Annexure B) and Statement of Accounts showing Assets and Liabilities

  3. NIL Certified by Chartered (in Annexure C)In Affidavit, every Director shall mention reason for closure of company or not carrying on business Fill form FTE along with scanned copies of the above-signed documents and ID and Address proofs of all Directors, Affix Digital Signature of any of the Directors and certify by any of professional. Upload form with MCA site and after getting the form approved by relevant ROC, the name of the company is uploaded on the website of MCA for 30 days. If no objection is received from any person, ROC orders striking off the name of the company from its FEES FOR FILING OF FORM FTE: Rs. 5000/- OBTAINING THE STATUS OF DORMANT COMPANY: This is another feasible option for Companies which do not have any significant transactions presently and are not carrying on any business, however, it cannot be closed due to the holding of assets to or have hopes for future expansion. New Companies Act enacted in 2013, under section 455, it has bought a concept of Dormant Company A: Where a company is formed and registered under this Act for a future project or To hold an asset or intellectual property and has no significant accounting transaction OR B: AN INACTIVE COMPANY: which has not been carrying on any business or operation or has not made any significant accounting transaction during the last two financial years or has not filed financial statements and annual returns during the last two financial years “Significant accounting transaction” means any transaction other than— payment of fees by a company to the Registrar; payments made by it to fulfill the requirements of this Act or any other law; allotment of shares to fulfill the requirements of this Act; and payments for maintenance of its office and records. may make an application to the Registrar in such manner as may be prescribed for obtaining the status of a dormant company. WHY SHOULD A COMPANY OBTAIN A STATUS OF A DORMANT COMPANY?

  4. 1.Reduction in compliance costs: After obtaining Dormant Status, only one form i.e. MSC 3 indicating financial position of the company duly audited by Chartered Accountant in practice need to be filed along with form fees as may be prescribed with ROC within 30 days of the end of financial year. Due to this, the compliances and forms to be filed by the company are reduced to a large extent, which gives relaxation in government fees and professional fees. Also, Dormant Company is not considered for the purpose of counting number of Companies for Statutory Audit. However, this does not give any relief in filing in the case of any change in shares, directors etc. The company needs to file the return or intimation as a normal company. 2.Exemptions : No need to hold a board meeting in each quarter, it can hold a board meeting in each half with at least 90 days gap. Provisions of rotation of auditor do not apply. No need to have Cash Flow Statement PROCEDURE: Hold Board Meeting to call Extraordinary General Meeting Obtain Certificate from Chartered Accountant Obtain Approval of Members by way of special resolution Obtain Auditor’s Certificate Statement of Affairs duly certified by a Chartered Accountant or Auditor(s) of the company Latest Financial Statement and Annual Return of the Company, in case the same are filed with Registrar Certificate regarding no dispute in the management or ownership Consent of lender, if any loan is outstanding File form MGT 14 for special resolution File Form MCS-1 with the registrar Form MCS 1 in STP form, therefore it is auto approved. ARE THERE ANY CONDITIONS FOR APPLYING FOR DORMANT STATUS? No inspection, inquiry, or investigation or prosecution pending in any court against the company No public deposits or interest thereon outstanding for payment No outstanding loan, secured or unsecured. If there are unsecured loans then the consent of the lender should be obtained and enclosed along with the form No dispute or difference amongst the management or promoters of the company No outstanding tax dues either to central or state government or local authorities No defaulted in payment of its workmen’s dues Not a listed company If you have any query please comment in the comment box below or Contact us. We would love to help you.Closing a Ltd Company

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