Over the past few decades, India has emerged as one of the most favorable and preferred option for foreign companies for investments. However, sometimes owing to commercial or some other reasons, foreign company needs to close its business operations in India. Accordingly, a foreign company in India and its subsidiary company must be aware about the closing process. In this article, we will be discussing about the process of closing of subsidiary company in India.
Process of closure of subsidiary company in India:
A subsidiary company is required to file the following forms with the Registrar of Companies for its closure and striking off the name from the registers-
- E-Form MGT-14
- E-Form STK-2
Procedure in case of voluntary strike-off:
In case of voluntary closure of subsidiary company, following procedure must be followed:
- The company is required to assign or authorize an officer or a director to commence a board meeting.
- Seven days prior to the meeting, a notice for the board meeting intimating the agenda of the same must be send to the members.
- The board meeting must be held and a board resolution should be passed in it regarding closing a subsidiary company.
- Intimation about the Annual General Meeting (AGM) or the Extra-Ordinary General Meeting must be sent.
- The general meeting must be convened for passing the Special Resolution by the board of directors and members.
- In the next step, the company is required to file Form MGT-14 by attaching all the required documents.
- Next, the Form STK-2 must be filed by attaching all the supporting documents prescribed by the statutes.
- Lastly, the Registrar of Companies verifies all the documents attached with the forms filed by the company and checks whether all the terms and conditions have been fulfilled for closing of subsidiary company. Once all such information and documents are thoroughly checked the ROC commences the process of striking off the company from the registers after publishing a public notice as per the norms under Insolvency and Bankruptcy Code (IBC), 2016.
Documents to be attached in forms for closing of subsidiary company:
While filing the forms for closing of subsidiary company in India, following documents are required:
- In Form STK-3, a duly notarized bond by all the board of directors must be given.
- Indemnity bonds in Form STK-3.
- Affidavit in Form STK-4.
- The certified true copy of the duly signed Special Resolution passed by the directors.
- A statement regarding the pending litigation and cases (if any) of the company in the court of law.
- A statement regarding the liabilities and assets of the company. This has to be certified by a practicing Chartered Accountant.
- Copy of the board resolution that authorizes the filing of the forms for closing of subsidiary company.
- The company must get a no-objection certificate from the concerned regulatory authority that governs it.
- Copy of the all the relevant order related to delisting from the stock exchange (if any).
Time taken for closing of subsidiary company in India:
On receipt of an application for striking off and closing of subsidiary company with the Registrar of Company (ROC) through E-Form STK-2, all the documents attached with it are verified thoroughly. The ROC then publishes a public notice and sends notice to the company and its director. In case there is no response from them in the given timeline, it strikes-off the company name from the registers. The whole process of closure can take up to 3 to 4 months.
In case the Registrar receives any objection regarding the closure of subsidiary company, the whole process can get lengthy or in some cases may be rejected by the ROC.
Eligibility for applying for voluntary winding-up:
Under the provision of Section 59(1) of the act, a company can choose for closing of subsidiary company as under-
- One who intends to liquidate the company voluntarily
- A company that has not committed any offence or default.
Process of voluntary liquidation:
The liquidation process used for voluntary closing of subsidiary company has the following steps involved-
- Public Announcement: The liquidator has to make an announcement publically within 5 days of his/her appointment. This is necessary for submitting the claims regarding liquidation within 30 days. Such a notice announcement must be published in one regional or local daily newspaper and one daily English newspaper in the jurisdiction of the place of business of the company registration. The same must be provided in the company’s official website as well.
The public notice or announcement should contain the following details-
- Date of commencement of the liquidation.
- Name and address of the liquidator.
- Contact details and Registration number of the liquidation.
- Last date of submission of any claim by the members or shareholders or any other related person.
- Mode of submitting any such claims.
- Opening of a bank account: One of the most important steps in closing of subsidiary company is to open a new bank account with a scheduled or authorized bank. The account opened must be named after the company or the corporate person involved with word ‘in liquidation” at the end. This account is used for receiving or making payments against the settled amount. The liquidating company must use only this account for any further transactions and settlements.
Although the entire process of closure is quite comprehensive and time consuming however, better planning can make the entire process hassle free and smooth.
We at Ezybiz India Consulting LLP, help your business with all the procedures and processes. Our team of professional and experts guide business houses and corporate personals with a number of services such as India Entry registration, wholly-owned subsidiary or subsidiary registration and closure process and other services.
For further enquiry and information visit www.ezybizindia.in