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Subsidiary company closure in India – Guide and Steps

There are 2 ways to close a subsidiary company or  entity in India:

Apply for strike-off or closure with the government authorities under section 248

Time taken for closure of subsidiary company in India – 3-6 months

Cost involved – USD 2000

Transfer the company to us and we will close the company. Your liabilities end in a day.

Time taken to transfer – 1 day

Cost to transfer the company and we undertaking the closure – USD 5000

Apply for a Subsidiary company or Entity Closure that is Strike-Off under section 248 to the government 

Under Section 248, a company may voluntarily apply to the Registrar for the removal of its name from the Register of Companies. This process is commonly referred to as “voluntary winding up” or “striking off” the company.

Conditions for Entity Closure i.e. Voluntary Winding Up under Section 248

For a company to voluntarily wind up under Section 248, it must satisfy certain conditions:

A company may make an application for removal of its name from the register on suo moto basis, inter alia, if:

  • A company has not commenced business within one year of its incorporation
  • A company not carrying on business or operations for a period of two immediately preceding financial years;
  • A company’s subscribers have not paid the subscription money they undertook to pay at the time of incorporation;
  • A company has no assets and liabilities;
  • No on-going litigations pending against or involving the company or any of its directors;
  • No dues towards income tax, VAT, excise, GST, service tax, or any other tax or duty;
  • Directors’ willing to furnish indemnity bonds and other declarations which cast responsibility on them to discharge the liability, if any arises in the future on the company;
  • Shareholders have passed special resolution approving to make an application for removal of name from the register of companies.

Steps for entity closure i.e. Voluntary Winding Up under Section 248

Once the conditions are satisfied, the company can proceed with the following steps:

  1. Board Meeting: The directors must convene a Board Meeting to pass a resolution approving the voluntary winding up of the company. The resolution must be passed by a majority of the total number of directors.

  2. Application to Registrar: Following the Board resolution, the company needs to make an application to the Registrar for removal of its name from the Register of Companies. This application must be made in the prescribed form, along with the prescribed fee.

  3. Public Notice: The Registrar, upon receiving the application, may cause a public notice to be issued, inviting objections to the proposed removal of the company’s name from the Register of Companies. The notice period is typically 30 days.

  4. Removal of Name: If no objections are received within the notice period, or if the Registrar is satisfied that the objections received are not valid, the Registrar may remove the name of the company from the Register of Companies.

Documents Required for Subsidiary Company Closure that is Voluntary Winding Up under Section 248

The following documents must be submitted to the Registrar:

  1. Indemnity Bond: Duly notarized indemnity bond in Form STK-3 by every director of the company.

  2. Affidavit: An affidavit in Form STK-4 by every director of the company stating that the company has not carried out any business activities and has no assets and liabilities.

  3. Statement of Accounts: A copy of the financial statements and assets and liabilities of the company, prepared up to a day not more than thirty days before the date of application and certified by a Chartered Accountant.

  4. Special Resolution: A certified copy of the special resolution passed by the company for winding up or the consent of 75% of the members of the company.

  5. Statement regarding pending litigations: A statement regarding pending litigations, if any, involving the company.

Transfer the company to us and we apply for closure. Your liability ends on day 1 of the transfer

Conditions for Entity Closure by transferring to us:

We will buy the company only, if:

  • A company has not commenced business since its incorporation
  • A company’s subscribers have not paid the subscription money they undertook to pay at the time of incorporation;
  • A company has no assets and liabilities;
  • No on-going litigations pending against or involving the company or any of its directors;
  • No dues towards income tax, VAT, excise, GST, service tax, or any other tax or duty;
  • Directors’ willing to furnish indemnity bonds and other declarations which cast responsibility on them to discharge the liability, if any arises in the future on the company;

Steps for transfer and closure:

  1. Due diligence – We conduct the due diligence of the company to check if there are any liabilities.
  2. Name change of entity – We apply for the name change of the entity in case you do not want to transfer the entity with your selected name.
  3. New directors appointment – Your directors resign and we appoint our directors
  4. Share Transfer – You transfer your 100% shares to us.

We are now the official owners and directors of the company. We will then maintain the company for 2 years or apply for closure right away.

Documents Required:

  1. Indemnity Bond – From existing directors to indemnify us in case of any future liability
  2. Share Certificates and Share transfer forms
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