An Overview of Winding Up One Person Company
One Person Company or OPC is a business format where a single person or individual owns the Company and there is no more than a single Director or more than a single member. Being a single-handled company, a One Person Company is easy to manage. If a One Person Company is inoperative for more than 1 year from the Date of Incorporation, then the owner may apply for closure of Company or Winding Up One Person Company under the normal procedure or FTE (Fast Track Exit) Scheme of the MCA, if not so it can be wound-up voluntarily/by order of the Tribunal. Even if it is not operative, it is compulsorily required to file all Regulatory Compliance & regular returns promptly unless it has filed the closure documents with the concerned ROC (Registrar of Companies). Hence, it is better to file for closure, so the Company's members are relived from fulfilling the legal & regulatory compliance.
Here, remember that Winding up One Person Company is different from changing it to a Public or Private Limited Company at any point of time when it is paid-up capital exceeds Rs. 50 lakhs or its average annual turnover of 3 preceding consecutive Financial Years becomes more than Rs. 2 crore. So, to get advisory or legal services for winding up One Person Company in India or any other types of Companies, can contact Corpbiz. We have a team of experts who can help you in Winding Up One Person Company.
What are the Different Methods of Winding Up One Person Company?
- Winding Up: This is done by holding a meeting approved by at least 2/3 of the creditors participating in a meeting, then the Management Board must submit to Commercial Register (CR) a request (in writing/electronic form through the Company Registration portal), the members' dissolution resolution & the minutes of the general meeting. Winding up is a more intricate process which is necessarily implemented when Company has assets & liabilities. In case of winding up, a liquidator should be appointed to manage the affairs of wound up Company.
- Striking Off: Removal of or Striking Off One Person Company via the Fast Track Exit Scheme. When a Company gains the Dormant Company's status, i.e., it has no activity as a Company since its inception or in the last 1 year it becomes a Defunct Company which can be wound up with a fast track procedure which is through STK-2 Form. Strike-off is done by the Registrar as per the requirements of the Companies Act.
Benefits of Winding Up One Person Company in India
The following are the benefits of Winding Up One Person Company:
- It helps you to save every year compliance cost;
- No more problems of record keeping;
- It will prevent you from unnecessary IT demands;
- Saves you from non-compliance penalties;
- Nor more Directors in default.
Criteria for Winding Up One Person Company in India
Winding up or Closing of One Person Company is either voluntary or by the Tribunal. Any OPC or One Person Company which has been inoperative for more than a year from its Date of Incorporation can apply for the closing of the Company. It is vital to file a closing application with the Registrar as it requires to be updated & the Company is free from all legal compliances & officially closed.
Vital Documents Required for Winding Up One Person Company
The following documents are needed for Winding Up One Person Company:
- Application for Striking Off of the OPC: The Company that wants to close must file an application with the Registrar.
- Board Resolution: The OPC must submit the resolution of closing approved by the Board Members.
- Consent of Directors: A letter of consent from the Directors stating their opinion to close OPC must be submitted.
- Affidavit of the Director;
- Indemnity Bond;
- Statement of Assets & Liabilities – A financial statement is indicating the sale of assets & cleared debts must be submitted.
- Company’s AoA & MoA, Incorporation Certificate, PAN Card & other Registration Certificates.
- The latest Financial Statement of the Company, prepared before 30 days of filing the application.
- Details whether the Company or entity has been operative for any period. If yes, since when operations are discontinued or not operated.
- A statement concerning the pending litigations, if any involving the Company.
- Company must provide NOC (No Objection Certificate) from closure from creditors.
- NOC from Regulatory Bodies (if relevant).
Procedure for Winding Up One Person Company
The complete winding up or closure procedure for OPC in India is voluntarily, involves the following processes or formalities:
- First, passing a resolution with support of 2/3rd in value of the creditors of the One Person Company for voluntarily winding up of the Company.
- The notice of this resolution is to be submitted to the relevant Registrar of Companies within 10 days of its approval from the creditors. Also, a declaration is to be submitted stating that the One Person Company has no debts/if there are some debts then these will be paid off via sales of its assets within 1 year.
- Filing the application for striking off the One Person Company with the relevant ROC together with submitting the Board Resolution in favour of winding up. In case, the closing One Person Company has been inactive for 1 year after its incorporation, the Form FTE has to be filed with ROC, within 30 days from the signing date of the Statement of Assets & Liabilities of the closing One Person Company.
- The resolution for winding up is also to be advertised in the Official Gazette & also in a newspaper which is extensively circulated in the district where the registered office or head office of the closing One Person Company is located.
- Appointing a registered Liquidator for processing of important tasks linked with the Winding up One Person Company. This liquidator is required to maintain & submit all requisite reports & accounts to the Tribunal & also to the Registrar.
- Submission of the Statement of Assets & Liabilities, Statement of Accounts, Indemnity Bond, etc.;
- If satisfied, the Registrar & the Tribunal will pass the winding up & declare the Once Person Closed.
Frequently Asked Questions
- Limited Liability;
- Separate Legal Entity;
- Fewer Compliance.