Close a Private Limited Company in India

A private limited company in India can be closed through three routes under the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016:

If you intend to restart your business later, you may instead apply for Dormant Company status under Section 455, and convert it back to an active company whenever you resume operations.

Which Companies Cannot Use the Strike-Off Route?

Under Rule 3 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, certain companies are ineligible for strike-off. These include:

• Listed companies.
• Companies delisted for non-compliance with listing regulations or other statutory laws.
• Vanishing companies.
• Companies facing an ordered inspection or investigation, or with resulting prosecutions pending.
• Companies with a pending reply to a notice under Section 234 of the Companies Act, 1956, or Sections 206 or 207 of the Companies Act, 2013, or a pending report under Section 208.
• Companies with any prosecution pending in court.
• Companies with a compounding application pending.
• Companies with outstanding public deposits or defaults in repayment.
• Companies with charges pending satisfaction.
• Companies registered under Section 25 of the Companies Act, 1956, or Section 8 of the Companies Act, 2013.

Companies in these categories cannot use the strike-off route while the relevant restriction applies. They must resolve the issue where legally possible or pursue an alternative closure route.

Your company can apply for closure, including winding up and strike-off (voluntary or initiated by ROC), if it meets the applicable conditions:

1. Grounds for ROC-initiated strike-off [Section 248(1)]: The ROC may strike off a company that failed to commence business within one year of incorporation, has not carried on business for the two immediately preceding financial years without applying for dormant status, or whose subscribers have not paid their subscription money where the company has not filed Form INC-20A within 180 days of incorporation. A company applying voluntarily under Section 248(2) does not need to fall within these grounds, provided it has extinguished all its liabilities.
2. Unpaid subscription or missing INC-20A [Section 248(1)]: The subscribers have not paid the agreed share capital. The company has also not filed within 180 days of incorporation.
3. No outstanding liabilities: The company must settle all taxes, loans, employee dues, vendor payments, and other liabilities.
4. No pending litigation: The company should not have ongoing legal proceedings or unresolved disputes that prevent strike-off. If any do exist, disclose them in the application rather than omit them, as undisclosed litigation discovered later can lead to rejection.
5. No restricted activity in the last three months: Under Section 249, the company must not have changed its name, shifted its registered office to another state, or disposed of property or rights for gain during the preceding three months. It must not have carried out activities beyond those necessary to close its affairs or have a compromise or arrangement application pending.
6. Compliance filings completed: File overdue AOC-4 and MGT-7 up to the end of the financial year in which the company stopped business. If the ROC has already started action under Section 248(1), file all pending returns first.
7. Required approvals: The board must approve the closure. Members must either pass a special resolution or give written consent of members holding at least 75% of the paid-up share capital (Section 248(2)).

Once these conditions are met, the company can apply for strike-off. If it has assets or liabilities to settle, voluntary liquidation may be more appropriate.

Closing a company, whether by strike-off or voluntary liquidation, requires a specific set of documents. Some documents apply to both routes, while others depend on the closure method:

The right closure route for a private limited company depends on your company’s activity status, financial health, and legal standing. Here is how each of the three routes works in practice:

1. Close a Company Through Striking Off (Section 248)

Strike-off is the simplest route for an inactive company that meets the statutory eligibility conditions. The process involves:

• Clearing outstanding dues, closing the bank account, obtaining the required approvals, and filing Form STK-2 with C-PACE.
• Paying the ₹10,000 filing fee.
• C-PACE reviewing the application, publishing a public notice with a 30-day objection window, and issuing the strike-off order if the application meets the requirements and no objections prevent approval.

The process usually takes around two months. For the full step-by-step process, check out the detailed explanation on our guide for company strike-off.

2. Closing Via Voluntary Liquidation

A solvent company that needs to settle its affairs and distribute its assets can use voluntary liquidation under Section 59 of the Insolvency and Bankruptcy Code, 2016. Here’s how it works:

• The board declares the company’s solvency, and members pass a special resolution within four weeks to appoint a liquidator.
• If the company has debt, creditors representing two-thirds in value must approve the decision.
• The liquidator realizes the company’s assets, settles creditor claims, and applies to the NCLT for a dissolution order.

Under Regulation 37 of the IBBI (Voluntary Liquidation Process) Regulations, 2017, the liquidator must endeavor to complete liquidation and submit the final report within 90 days, or 270 days if creditors approve the resolution. The NCLT then orders the company’s dissolution.

3. Compulsory Winding Up

The NCLT may order compulsory winding-up under Section 271 of the Companies Act, 2013, on specified grounds such as fraud, or order liquidation under the IBC in insolvency cases. Here’s how it works:

• A petition is filed using the applicable procedure, including Form WIN-1 or WIN-2 where required.
• The NCLT appoints a liquidator to realize assets and distribute proceeds according to the legal order of priority.
• The company is dissolved after the winding-up or liquidation process is completed.

The process typically takes 1–3 years or longer.

For complete details about both winding-up routes and their step-by-step process, check our page on winding up of a company.

Closing a private limited company in India involves government fees, professional charges, and documentation. Costs may rise if there are pending compliance issues or liabilities. Here's how the methods compare:

Note: These figures are indicative and subject to change; actual costs vary with the company’s compliance backlog, assets, liabilities, and professional charges.

Closing your Pvt Ltd company is not your only option if you want to exit. If the business still has value, selling the company or its assets can help you recover value while transferring the business to a new owner. The right option depends on whether you want to transfer ownership, sell specific assets, or shut down the business completely.

How Does Selling a Private Limited Company Work?

When you sell rather than close, ownership passes to a new buyer, and the business keeps operating. It usually takes one of two forms:

• Share sale: You sell your shares in the company. The buyer takes over the entire entity, including its operations, employees, contracts, and existing liabilities.
• Asset sale: You sell selected assets (such as equipment, stock, or IP) rather than the company itself. In this case, the buyer generally picks up specific assets and doesn't automatically inherit the company's liabilities.

In a share sale, the company continues to exist legally and operationally under new ownership. In an asset sale, your company remains with you after the assets are sold, so you may still need to formally close the emptied shell afterward.

Key Differences Between Selling the Company and Closing It

Here’s a quick comparison to help you understand how selling a company differs from formally closing it:

If your company is financially healthy, compliant, and free from major liabilities, selling it may generate returns instead of requiring you to bear closure costs. However, if it is dormant or has significant liabilities, formally closing it through strike-off or winding up is usually the more suitable option. Founders planning a fresh start can later complete a new private limited company registration.