Starting and closing a company are two ends of the same journey in the business world. While incorporation marks the exciting beginning of an entrepreneurial venture, closure is a responsible decision when a business becomes inactive or unviable.
Whether you're setting up a new company or wrapping up operations, it's essential to follow the correct legal process. In this article, we walk you through the company incorporation process, the closure of company, relevant sections under the Companies Act, 2013, and answer frequently asked questions (FAQs) to guide you through every step.
Part 1: Company Incorporation in India
- What is Company Incorporation?
Company incorporation is the legal process of registering a business as a separate entity with the Ministry of Corporate Affairs (MCA) under the Companies Act, 2013. Once incorporated, the business gets a unique identity called the Corporate Identity Number (CIN) and becomes a legal entity separate from its owners.
- Legal Provisions
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Section 3 of the Companies Act, 2013: Defines the types of companies that can be incorporated (private, public, and One Person Company).
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Section 7 of the Companies Act, 2013: Lays down the procedure for incorporation of a company.
- Steps for Company Incorporation
- Obtain Digital Signature Certificate (DSC)
All directors and subscribers need a DSC to sign electronic forms.
- Apply for Director Identification Number (DIN)
DIN is a unique number allotted to an individual who wants to be a company director.
- Choose and Reserve Company Name
Apply through the SPICe+ Part A form on the MCA portal. The name should be unique and not similar to an existing company or trademark.
- Draft MOA and AOA
Prepare the Memorandum of Association (MOA) and Articles of Association (AOA), which define your company’s objectives and internal rules.
- File SPICe+ Part B Form
SPICe+ is a simplified integrated form to apply for:
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Company incorporation
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PAN and TAN
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EPFO, ESIC, GST registration
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Professional Tax (in select states)
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Bank account opening
- Pay the Fees and Stamp Duty
The incorporation fee depends on the authorized capital and type of company.
- Get Certificate of Incorporation (COI)
Once approved, MCA will issue the COI containing your CIN, PAN, and TAN.
Documents Required
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PAN and Aadhaar of directors
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Passport-sized photos
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Address proof (utility bill, rent agreement)
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Proof of registered office (ownership/rental agreement)
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MOA and AOA
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Declaration by directors in Form INC-9
Part 2: Company Closure in India
Every business doesn't succeed as planned. If a company becomes inactive or non-operational, it’s better to close it legally instead of keeping it non-compliant. This process is known as company strike off or company closure.
- Legal Provisions
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Section 248 of the Companies Act, 2013: Provides the conditions and procedure for removing a company’s name from the Register of Companies.
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Rule 4 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016
- When Can You Apply for Company Closure?
You can apply for voluntary company closure if:
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The company has not commenced business within one year of incorporation, or
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The company has been inactive for two consecutive financial years and has not applied for dormant status, and
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There are no pending legal disputes or liabilities
- Step-by-Step Closure Procedure
- Hold Board Meeting
Pass a resolution for company closure and authorize a director to file the application.
- Clear Liabilities
Pay off debts, taxes, employee dues, and settle all company liabilities.
- Hold General Meeting
Pass a special resolution for strike off and get approval from 75% of shareholders (in paid-up capital).
- File Pending ROC Returns
Complete any overdue filings such as MGT-7, AOC-4, or DIR-3 KYC.
- Prepare Closure Documents
Documents include:
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Indemnity bond (Form STK-3)
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Affidavit (Form STK-4)
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Statement of accounts certified by CA (not older than 30 days)
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Board and shareholders’ resolution
- File Form STK-2
Submit the application for strike off along with the fee of ₹10,000 on the MCA portal.
- ROC Approval
If satisfied, the Registrar will strike off the company and publish a notice in the Official Gazette.
Cannot Apply for Closure If:
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The company has ongoing legal proceedings
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The company has defaulted on government dues or taxes
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Charges are pending for satisfaction
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The company is listed
Frequently Asked Questions (FAQs)
- What is the cost of company incorporation in India?
The government fee depends on the authorized capital. For startups with ₹1 lakh capital, it’s around ₹2,000–₹3,000 (excluding professional charges).
- How long does it take to incorporate a company?
It usually takes 7–10 working days, depending on document availability and MCA approvals.
- What is the difference between striking off and winding up?
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Striking Off is a fast-track voluntary closure of inactive companies under Section 248.
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Winding Up is a longer legal process involving a tribunal, used when liabilities exist or company is under investigation.
- Can a company be closed without filing annual returns?
No. All pending returns and financial statements must be filed before submitting Form STK-2 for strike off.
- Do I need a Chartered Accountant for company closure?
Yes, a Chartered Accountant is required to certify the Statement of Accounts, which is mandatory for filing Form STK-2.
- What happens if I don't close an inactive company?
Non-compliance leads to:
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Late filing penalties
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Director disqualification
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Legal action under Section 164 and 248
Final Thoughts
Whether you're starting a new venture or responsibly wrapping one up, company incorporation and company closure are two important compliance journeys every entrepreneur should understand.
Incorporating a company gives your business legal status, credibility, and growth potential. Similarly, closing a company the right way helps you avoid unnecessary fines, maintains legal cleanliness, and protects your future business prospects.
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