I. Under Companies Act, 2013
Part A: Convert Section 8 Company to Private or Public Company
As per the Companies Act, if a Section 8 company intends to cease its operations, it is mandated to undergo a conversion process to a private or public company before initiating the closure.
Following is the process for conversion:
1.Obtain Approval through Resolutions:
Pass resolutions at both the Board and shareholders meeting to approve the conversion of the Section 8 company or the surrendering of its license.
2.File Form MGT14:
Within 30 days of the Special Resolution, file Form MGT14, providing details of the resolution and obtaining the necessary approvals.
3.Submit Form INC-18:
File Form INC-18 with the Regional Director (RD), with all the essential documents such as CA statement not older than 30 days if the application is made after the expiry of three months from the date of preceding financial year to which the financial statement has been filed, Compliance Certificate confirming compliance with the Act and its rules, Proof of serving of notice to other authority.
A copy of the application with annexures as filed with the Regional Director shall also be filed with the Registrar.
5.Publish Newspaper Advertisement:
In Form INC-19 company has to publish a newspaper advertisement in both English and a vernacular language within one week of submitting the application to the RD and has to publish it on the website of the company.
6.Intimate to other Authority:
The company shall send a notice, along with the application and attachments, via registered post or hand delivery to various authorities including the Chief Commissioner of Income Tax, Income Tax Officer, Charity Commissioner, Chief Secretary of the State who has jurisdiction over the company and other relevant government authorities. If any of these authorities wish to make representation to the Regional Director, the same to be done within sixty days of receiving the notice, providing an opportunity for the company to respond.
7.Amend MOA and AOA:
On receipt of the approval of the Regional Director, the company needs to pass a Special Resolution for amending the Memorandum of Association (MOA) and Articles of Association (AOA) consequent to the conversion.
8.File Form INC20 with ROC:
File Form INC20 with ROC within thirty days from the date of receipt of the order, along with the approval order from the RD, amended E-MOA & E-AOA, and a declaration from directors confirming the fulfillment of conditions imposed by RD.
Part B: Striking off the Company
Pass resolutions at both the Board and shareholders meeting to approve the closure of the company.
File form STK 2
Attach an Affidavit and Indemnity, signed by all Directors of the company, confirming their responsibility and indemnifying against any liabilities, additionally provide a CA Statement of accounts not older than 30 days. KYC documents of each Director, including PAN, Aadhar card, and residential address proof not older than 2 months, as part of the closure process.
II. Under IBC, 2016
Voluntary liquidation of corporate persons
1.Declaration of Solvency duly verified by an affidavit by majority of directors:
Affidavit to be accompanied by:
a. Audited Financial Statement and record of business operation of past two years/since Incorporation whichever is later,
b. Report by the Registered Valuer about the valuation of the assets of the Company, if any.
Within 4 weeks of above declaration, the company must undertake either:
(i) Pass a special resolution in a general meeting, mandating voluntary liquidation and appointing an insolvency professional as the liquidator; or
(ii) Pass a resolution in a general meeting, necessitating voluntary liquidation due to the expiry of its designated duration or occurrence of an event specified in its articles for dissolution, and appointing an insolvency professional as the liquidator.
In case the company has outstanding debts, creditors representing 2/3 in value of the company’s debt must approve the resolution within seven days of resolution.
3.Intimation to ROC:
The company shall intimate to ROC within 7 days of approval of the resolution by members/subsequent approval by creditors.
a. One for the Board resolution
b. One for the special resolution passed in the general meeting.
a. For Declaration of Solvency & Appointment of Liquidator.
4.Intimation to IBBI:
The Liquidator must notify the IBBI within 7 days of their appointment.
The liquidator has to make a public announcement within 5 days of its appointment in form A in one English and regional language newspaper and on the website (if any) calling upon stakeholders to submit their claims within 30 days.
6.Opening of bank account.
The liquidator needs to open a bank account in the name of the company for receipt of all money due to the corporate person.
7.Verification of Claims
Liquidator has to verify the claims within 30 days of receipt & preparation of list of stakeholders by liquidator.
8.Realization of Assets of the company.
The liquidator has to realize and recover the assets of the company in order to maximize the value of the company. The same amount must be deposited in a bank account opened for the same purpose.
9.Distribution of proceeds to claimholders.
The money released has to be distributed to the stakeholders within 30 days from receipt of amount.
10.Preparation of Final report by Liquidator.
After completion of liquidation process, liquidator has to prepare the final report containing Audited accounts of liquidation, statement showing the assets disposed of, debts are discharged and no litigation is pending, etc.
The same report has to be submitted to the concerned ROC and IBBI as application for dissolution.