How is a private limited company closed?
A private limited company is closed when its name is removed from the register under section 248, or when a winding up ends in dissolution. Selling the shares closes nothing. The company continues under the new members.
Which routes actually close it?
Two routes end the company. A transfer of shares does not.
| Route | What it does |
|---|---|
| Removal of the name | The company applies in Form STK-2 after the liabilities are extinguished, or the Registrar starts the process where section 248 allows it. |
| Winding up | Affairs that remain are dealt with through a liquidator or the tribunal. The name is not removed by STK-2 while those affairs are open. |
| Sale of shares | The members change. The company, its number, and its debts stay. |
A private limited company needs two shareholders and two directors. Membership is limited to 200 people. It does not need seven shareholders, and the older cap of 50 members is not the current limit.
When is the name removed?
Section 248(2) lets the company apply after it has extinguished all its liabilities. The members pass a special resolution, or members holding at least 75 percent of the paid-up share capital consent. The application, the statement of accounts, and the indemnity are on the strike-off page. The application carries the government fee. What follows once the name is off the register is on the consequences page.
This is not a winding up, and it is not the old Fast Track Exit scheme. A dormant company under section 455 is a company that has applied for that status. Dormant status is not the test for STK-2.
Does a sale of shares close it?
No. The buyer takes the shares and the company carries on, or it sits with no business, still on the register. Annual filings continue until the name is removed or the company is dissolved. A sale can be the step the owners want when someone else will run the same company. It is not a closure filing.
When is strike-off the wrong route?
Strike-off is the wrong route while liabilities remain. A company that cannot pay what it owes is not closed by a board resolution, and it is not automatically wound up because it is a private company. Where the Insolvency and Bankruptcy Code applies, that code is the process for a company that cannot pay. Where affairs still have to be wound up outside that code, the tribunal’s winding-up process is the route, not Form STK-2.
The Registrar can also move to remove a name where the company has not commenced business within one year of incorporation, or has not carried on business for two financial years and has not asked to be treated as dormant. That is the Registrar’s notice. It is not an application the company files in order to skip a debt.
Frequently asked questions
Four questions cover a sale of shares, Form STK-2, liabilities, and a dormant company.
Is selling the shares a closure?
No. The buyer becomes the member. The company, its number, and its liabilities continue.
Is Form STK-2 a winding up?
No. STK-2 asks the Registrar to remove the name under section 248. Winding up is a different process, used where affairs remain.
Must the company have no liabilities?
Yes, before it applies. Section 248(2) lets the company apply only after it has extinguished all its liabilities.
Is a dormant company the only company that can apply?
No. Dormant status under section 455 is a different filing. Removal of the name is available to a company that has extinguished its liabilities, not only to a dormant company.
Sources
Removal of the name is section 248. A private company has two members and two directors, and membership is limited to 200.