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Closure of Indian Subsidiary – A Complete Guide
If you do not want to continue your Indian Subsidiary Company, it is better to close it on time. Otherwise, you have to maintain some compliance against the company. Unless you maintain company compliance, you may be fined or penalized. After closing the company all compliance and responsibilities will be null and void. You need not submit a yearly audit report for your company. You need not hire a CA/CS to submit the audit report for the company. So, you should better wind up the Indian Subsidiary so that you can avoid all such complications and penalties.
If you wish to close your Indian Subsidiary Company, you have to submit a closing form to ROC, along with the proper documents. It might be complicated and ambiguous. You may make a mistake or not know the proper way to file it. Then, it would be another burden for you as the company will not be closed. Don’t worry. Contact Online Legal India today to strike off your company, and stay confident that your company will be closed very soon.
Apply for Subsidiary Company Closure under Section 248
To strike off your subsidiary company, you have to follow the procedure of section 248 of the Companies Act. Any company can voluntarily apply to remove the name of the company from the Register of Companies.
For winding up an Indian subsidiary under Section 248, the company has to satisfy the following conditions: They are:
  • The company has failed to commence any business for the last year after incorporation.
  • The company has not carried on any business for the last 2 financial years.
  • A company’s subscribers of the memorandum are not paid it that they undertook to pay at the time of incorporation.
  • The subsidiary has no liabilities or assets.
  • No litigation is pending against the directors
  • No dues of income tax, GST, excise or service taxes are pending.
  • Directors are willing to furnish indemnity bonds which cast responsibility to discharge the liability
  • Shareholders have passed a special resolution approving the removal of the name from incorporation from the register of companies.
The Indian Subsidiary Closure Process
Once the above-mentioned terms are satisfied, you can apply to wind up the Indian subsidiary. The steps are mentioned below:

Arrange a board meeting

The parent company directors must convene a board meeting to pass a resolution that declares that all the directors want to strike off the company. The resolution must be passed by a majority of the total number of directors.

Approval from Shareholders

You need to pass a special resolution in the board meeting for the closure of the Indian subsidiary, describing the current situation for which you want to close it.

Clearance from Creditors

The outstanding debts and liabilities of the subsidiary company must be settled. The NOC letter is also essential to inform the creditors that the company is going to be closed.

Clearance from Regulatory Authorities

The acceptance of the company regulatory authorities of the company dilution is necessary to submit to the ROC. The tax authorities must provide a clearance certificate.

Liquidation

If the subsidiary company needs to liquidate any property to settle the debts and liabilities, it should do so. Otherwise, the objection may be raised during the closure, and it will not be closed.

Public Notice from the company authorities

According to the Companies Act 2013, the subsidiary company authorities should publish the notice of company closure consecutively for a month in English newspapers and a vernacular daily.

Registration Cancellation

The subsidiary company needs to get approval from the tax authorities, labor department, and similar sections, and it must be submitted to the ROC.

Bank Account Closure

All the bank accounts of the company need to close and transfer any remaining funds to the account of the parent company or distributed to the shareholders- as per the decision of the board of directors.

Final Compliance

Comply with the legal requirements that you have to follow. Learn it from the register of companies or the rulebook.

File Closure Documents with ROC

Prepare a file to arrange all necessary documents with the ROC, including the fast-track exit form (FTP form), and submit it to the ROC. The documents include:

  • Board resolution authorizing closure
  • The special resolution passed by shareholders (if applicable)
  • Affidavit from directors regarding clearance of liabilities
  • Financial statements
  • NOC from tax authorities
  • NOC from creditors
  • Any other relevant documents are necessary
  • Public Notice by the ROC
Upon receiving the application, the Register of Companies will create a public notice with the declaration of the Indian subsidiary closure application. The register also mentions that the name of the company will be removed from the register of companies. The notice period is 30 days.

Removal of the Company’s Name

If no objection is received from anybody to the register within that notice period, or if the object received is not valid, the register will proceed to deregister the name from the Register of Companies.
The Documents Required For Striking Off a Subsidiary Company
The Following Documents Are Essential for submitting Indian Subsidiary Winding Up

Indemnity Bond

Filling out the form STK-3 is essential for submitting an indemnity bond. The bond must be notarized by every director of the company.

Affidavit

The form STK-4 needs to be filled out duly, and all the directors have to declare that there are no debts or liabilities during the activity or inactive time.

Statement of Accounts

A copy of the financial statement of assets and liabilities must be furnished, which must not be prepared less than 30 days before submitting the application. Debts and liabilities must be nil during the submission for Indian Subsidiary Companies. This statement of account must be certified by a Chartered Accountant.

Notice for a Board Meeting

A notice must be conducted with the information that there is a board meeting for special resolution of the subsidiary winding up.

Special Resolution Copy

The board meeting will pass the special resolution to wind up the company, where more than 75% of members need to provide consent in written format. A copy or special board resolution must be submitted.

Statement Regarding the Pending Litigation

If there are any pending litigations involving the company, they must be settled.

NOC from Regulatory Authority

The company must obtain a No Objection Certificate from the regulatory authority of the company.

Delisting Certificate from the Share Market

If the company has shares for the public, they must be closed and delisted from the share market.
Process to Deregister an Indian Subsidiary by the ROC
All these documents must be submitted to the ROC. After submitting the documents, the company will process to deregister from the register of companies.If everything is found perfect as per the documents and form submissions, the Register of Companies will provide a public notice that the company is about to close soon.
If no objection is found within 20 working days after the notice, the register will proceed with the closure of the Indian subsidiary. To complete the process, it takes 3 to 4 months from the end of ROC.
The register of companies will issue a certificate against the closure of the company.
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Frequently Asked Questions (FAQs)
What is an Indian subsidiary?
An Indian subsidiary is a form or company that acts as an extra arm to assist the parent company in reaching out to different regions, and business areas or adding to new services with a new board of directors with different liabilities. The main company should have more than 50% of the shares of any Indian subsidiaries. A foreign company can also invest in forming Indian subsidiaries.
How do I close a subsidiary company?
To close an Indian subsidiary company, the parent company has to convene a board meeting to pass a special resolution for the closure of the company. Then, the subsidiaries need to settle all the liabilities and debts. Then, apply the necessary document to the ROC. He will process it at the stipulated time.
Can a subsidiary be dissolved?
Yes, a subsidiary can be dissolved through voluntary liquidation or application to the ROC. Contact Online Legal India to learn more.
Can I sell a subsidiary company?
Yes, you can sell a subsidiary company with all its debts and disabilities by transferring ownership through the sale of shares and assets. Then, you have to comply with all legal liabilities. After the completion of the sale agreement, the subsidiary becomes owned by the person who purchased it
How much does it cost to close a subsidiary company in India?
There is a fixed government fee to close a subsidiary company in India. However, it may vary if you hire any assisting company to help you conduct the entire process. You can contact Online Legal India for this purpose.