How to Close a Company in India: Complete Guide to Business Exit Methods (2026)

Published Thu, 09 Apr 2026 | Updated Thu, 09 Apr 2026 Corporate Law

Exiting a Business is an important decision taken by shareholder, it involves critical thinking, ceasing business operation, transferring of business and its ownership or sometimes winding up of the Company. It’s mainly depending on the Financial, strategic or personal decision of the shareholder to exit from the business.

Business exit may occur in different manner involves Transfer of ownership, striking off the business, liquidation or Merger with another company. Every business exit has different approaches, legal requirement and advantages. Hence, understanding these ways is essential to plan an organized and legally compliant exit.

Different Ways to Exit a Business in India

1. Transfer of Shares
2. Voluntary Liquidation
3. Winding up by Tribunal
4. Striking off the business
5. Liquidation under IBC

1. Transfer of Shares

Transfer of Shares means transfer of ownership from one shareholder (Transferor) to Another Person (Transferee), once the transfer is completed, the Transferee becomes the legal Owner of the shares of the Company along with its Voting and dividend Rights.

If Share are transferred from Resident shareholder to Non-Resident Shareholders or vice-versa, FEMA Guidelines will be applicable.

1A. Legal Framework

Transfer of Shares are covered under Section 56 of the Companies Act, 2013. It mainly operated and recorded by Ministry of Cooperate Affairs through filing with the Registrar of Companies (ROC)

In Private Companies, there are restriction in transfer of Ownership while on the other hand Public Companies are generally allowed to freely transfer the ownership of the business.

1B. Procedure for Transfer of Shares

1. Checking of Article of Association: First step is to check the Article of Association regarding any restriction on transfer of shares such as Right of Pre-Emption etc.
2. Intimation to Company: Shareholder shall give his notice to the Company regarding their intention to transfer of Share, hence the Company further inform to all the existing Shareholders and its price, timeline they can purchase of shares and availability of Shares etc.
3. Transfer Deed: To transfer the shares, Share Transfer deed (SH-4) is executed by both the transferee and Transferor.

Share Transfer Deed (SH-4) should have followed:

• Duly stamped
• Dated
• Having father’s Name, address and Occupation
• Number of Shares transferred
• Certificate No.
• Folio No.
• Consideration i.e. Value of Share Transferred
• Executed by both the Parties

1. Payment of Stamp Duty: Stamp duty shall be payable on Share transfer deed according to State law applicable, the rate is calculated mainly on the         consideration.

2. Submission to the Company: Share transfer deed along with the Share certificate to be submitted to the Company to be taken for approval and record.

3. Approval by Board of Director: Board of Director shall review the Share transfer deed and approve the transaction by passing Resolution

4. Registrar of Members: Once approval received from Board of Directors, the Company shall record the transaction in Registrar of Members and will endorse the Share Certificate to the transferee.

2. Voluntary Liquidation

Voluntary Liquidation refers the process in which Solvent Companies decides to wind up their operation by selling its assets and paying off its Liabilities and distributing the remaining funds to the shareholders of the Company. Once the entire process is completed, The Company is finally dissolved.

This approach mainly chosen when

• The Company completed its purpose of the business
• Promoters want to exit from the business
• Company is inactive but has assets and liabilities to settle
• The Shareholders want to discontinue the business due to financial and Strategic reasons.

2A. Legal Framework

Voluntary liquidation is regulated under Section 59 of the Insolvency and Bankruptcy Code, 2016.

2B. Procedure for Voluntary Liquidation

1. Board Meeting and Declaration of Solvency

The Board of Director of the Company hold a board meeting to discuss and approve Voluntary Liquidation and shall make a Declaration of Solvency stating that:

• They have made a full inquiry into the affairs of the Company and they have formed an opinion that either the Company has no debt or that it will be able to pay its debts in full form the proceeds of assets to be sold in the Voluntary liquidation;
• The Company is not being liquidated to defraud any person.

The declaration shall be accompanied with the following documents:

• Audited Financial Statement and Record of business operation of the Company for the Previous Two years since its incorporation, whichever is later
• A report of Valuation of the assets of the Company by Registered Valuer.

2. Approval of Shareholder and Appointment of Liquidator

Within 4 weeks of Declaration made by Director, the Company shall hold an Extra Ordinary General Meeting and pass a Special Resolution to liquidate the Company Voluntarily and appointing an Insolvency Professional to acts as the Liquidator.

3. Consolidation of Claims

The Liquidator shall receive and collect the claims of the Creditors

4. Verification of Claims

the liquidator will verify the claims submitted by creditors and shareholders

5. Realization of Assets

The Liquidator sell Company assets including lands, building, machinery, inventory and receivables and funds collected are used to settle liabilities

6. Payment of Liabilities

All outstanding dues, liabilities and obligation shall be settled according to the order stated under law

7. Distribution to Shareholders

Remaining funds shall be distributed to the Shareholder according to sequence provided in the IBC Code.

8. Application for Dissolution

Once the whole process is completed, the Liquidator will submit final report to the IBBI, ROC and NCLT and make application to NCLT for seeking dissolution order.After receiving the order from the NCLT, the liquidator intimate the same to ROC and the company gets dissolved.

3. Winding up by Tribunal

Winding up by Tribunal refers to compulsory liquidation of the Company ordered by National Company Law Tribunal, the operation of the business significantly got closed and its assets were realised and liabilities are paid and the remaining amount distributed to the shareholders

As per Companies Act, 2013 Tribunal may order the winding up of the Company due to following reason:

1. When Company has passed a Special Resolution resolving that the Company be wound up by the Tribunal;
2. When Company has acted against the interest of the Sovereignty and Integrity of India, the security of State and friendly relations with the foreign state, public order, decency or morality;
3. An application is made by the Registrar or any other person authorized by Central Government stating that Tribunal is of opinion that the affairs of the Company has been conducted in a fraudulent manner of the Company or was formed for fraudulent or unlawful purpose or person concerned in the formation or management of the Company has been guilty of fraud, misfeasance or misconduct in connection or it would be proper to wind up the Company;
4. The Company defaulted in filing with the Registrar its Financial Statements or Annual return for the immediately preceding the Five Consecutive financial year; or
5. If the Tribunal is of opinion that it is just and equitable that the Company should be wound up.

3A. Legal Framework

The legal framework for winding up of a company in India is mainly governed by the Companies Act, 2013. These sections explain the modes of winding up , circumstances for winding up by Tribunal , filing of petition , powers of the Tribunal , and appointment of a Company Liquidator .

3B. Procedure for Winding up of Company

1. Filing of Petition: A winding up petition being filed by following person before NCLT

• The Company itself
• any creditor or creditors
• any contributory or contributories;
• The Registrar
• Any person authorised by the Central Government in that behalf
• by the Central Government or a State Government in specific cases      

The Petitions are presented to the NCLT with supporting documents.

2. Admission of petition by Tribunal: Tribunal may receipt on the petition, shall pass following orders:

• Dismiss it, with or without cost
• Make an interim order as they think fit
• Appoint an provisional Liquidator till winding up order
• Make an order of Winding up of Company with or without cost
• or any other order as it think fit

The Order shall be made within 90 days from the date of Presentation of the Petition.

3. Appointment of Company liquidator: the tribunal at the time of passing an order of winding up of Company, shall appoint a Company Liquidator from the Panel. The terms and conditions for appointment and fees payable shall be determined by the tribunal on the basis of performance, qualification and experience of the liquidator and size of the Company.

4. Preparation of Statements of Affairs: Directors/officers must submit a verified statement of assets, liabilities, creditors, etc., within the prescribed time.

5. Effect of Winding up: Once the Winding up order is passed by the tribunal, it shall be deemed as an notice of discharge to the employee, officer and workman of the Company, except when the business of the company is continued.

6. Winding up Committee: liquidator shall make an application to constitute a Winding up Committee to monitor the liquidation proceeding of the Company

7. Submission of Report: the liquidator shall submit a report within 60 days from the date of order to the tribunal containing the nature & details of the assets of the Company including its location and its value and also include instance of fraud committed by any person or any officer of the Company and also features report on the viability of the business of the Company.

8. Consideration of Report: After considering the report, the tribunal shall fix a time limit within which the winding up process shall be completed and the Company dissolved, tribunal can further order the sale of the Company as a going concern or sale of the assets of the company. And can also order to form a Sale Committee consisting of creditors, promoters or officers to assist the liquidator.

9. Settlement of List of Contributories: The Tribunal settles a list of contributories (persons liable to contribute to company assets).

10. Realization and Distribution of Assets: Assets of the Company are realized by the Company liquidator and distributed in accordance with the prescribed order of priority ensuring fairness among stakeholders.

11. Dissolution Order: When the affairs of the Company are being completely wound up, the Company liquidator shall make an application to tribunal for dissolution of the Company, If Tribunal finds that it’s just and reasonable to pass an order of Dissolution, it shall make an order of dissolution of the Company.

4. Striking off the Business

Striking off the business is a legal procedure involving removal of the name of the Company from the Register maintained by Registrar of Companies, once the Registrar approves the application for striking off the Company, the legal existence vanishes and Company can no longer operates its business, losing its legal existence.

4A. Legal Framework

The Provision regarding striking off are governed under Section 248 to 252 of the Companies Act, 2013 & Companies & Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016

4B. Mode of Striking off the business

1. Registrar of Companies

1. When Company has failed to commence his business within 1 year from the date of Incorporation; or
2. When Company is not carrying any business or operation for a period of 2 immediately preceding financial year and has not obtained or made an application regarding having status of Dormant Company.
3. The Subscriber to the Memorandum has not paid the subscription Money that has to pay at the time of incorporation and Declaration to this effect has not filed within 180 days of its Incorporation.
4. The Company is not carrying any business after physical Verification.

The Registrar of Companies will send notice to the Company regarding their intention to remove the Name of the Company from Registrar of Companies and request them to send their representation along with the necessary documentation within a period of 30 days from the date of Notice.

2. Voluntary Strike off

A Company can suo moto apply for striking off the Company after eliminating all its Liabilities and by passing a Special Resolution.

Procedure For Voluntary Strike off

Step 1 - Passing of Board Resolution

Company will pass a Board Resolution approving strike off the business of the Company and will authorize the Director/Company Secretary to file the application with Registrar of Companies

Step 2 – Settlement of Liabilities

Company need to settle all its liabilities and shall also receive approval from any regulatory body if governed under any Special Act which will be enclosed with the application

Step 3 – Shareholder’s Approval

Obtain shareholders’ approval by passing a Special Resolution or securing consent from at least 75% of shareholders (in terms of paid-up share capital).

Step 4 – Filing of Application

Company will file file Form STK – 2 with Registrar of Companies along with necessary documentation includes

1. Indemnity Bond (Form STK-3) duly notarized by all directors, undertaking to settle any future liabilities;
2. Affidavit (Form STK-4) from directors confirming that the company has no liabilities and is eligible for strike-off;
3. Statements of Accounts (Form STK-8) certified by a Chartered Accountant, showing nil assets and liabilities and not older than 30 days from the date of filing;
4. certified copy of the Special Resolution or consent of 75% shareholders along with the filing fees and other documents

STEP 5 – ROC Examination and Public Notice

Registrar of Companies examine the application along with the attached documents to ensure application compliant with the Companies Act, 2013 and related rules & Regulations, ROC can further issue Public notice in Form STK – 6, which will be published on MCA Website and Official Gazette along with publishing notice on the English and at least once at Vernacular Newspaper and ROC can simultaneously intimate concerned Authorities having jurisdiction over the Company for any kind of objection to be received within 30 days from the date of issue of Intimation

STEP 6 – Finally Strike off

If No objection received from the Company within the prescribed timeline or if there is any objection raised which are resolved, ROC shall proceed with Striking off the Name of the Company from the Registrar of Companies and notice shall be issue on Official Gazette, hence the Company will be dissolved.

5. Liquidation under Insolvency and Bankruptcy Code, 2016

Liquidation under Insolvency and Bankruptcy Code, 2016 is a process of Winding up of a Company when its Corporate Resolution Process (CIRP) is failed and the Company does not have any resolution other than liquidating the Company

Liquidation essentially a Last resort under Insolvency & Bankruptcy code, 2013 to recover the Value of the Creditors when restoration is not possible

5A. Legal Framework

The Provision regarding Liquidation are governed under Section 33 to 53 of the Insolvency & Bankruptcy Code, 2016

5B. Procedure of Liquidation under Insolvency and Bankruptcy code, 2016

STEP – 1 Initiation

When Company failed to undergo Resolution process under Insolvency and Bankruptcy code, 2016, The National Company Law Tribunal passed an order to initiate a Liquidation under Section 33 of the IBC, Code 2016 and Once liquidation order is passed, no suit or other legal proceeding shall be instituted by or against the Corporate

STEP – 2 Appointment of Liquidator

National Company law Tribunal (NCLT) shall appoint an Liquidator to take over the Company’s business, the liquidator will be placed replacing Board of Directors taking control of its operation and assets. The           liquidator identify assets evaluating it making a whole list along with it verify the list of creditors & their claims. The liquidator becomes the Main authority acting and overseeing the winding up of the Company.

STEP – 3 Public Announcement

The liquidators makes a Public Announcement to invite claims from all Creditors within a period of 30 days from the date of commencement of the liquidation process and liquidator further holds a Liquidation estate as a fiduciary for the benefit of all Creditors

STEP – 4 Verification of Assets

Liquidator verifies the claims of the Creditors or can ask the creditor for further documentation and evidence to verify the whole claim or any part. Once verification is complete, liquidator can further admit or reject the claim and will communicate his decision to the Creditor, if Any creditor aggrieved can make appeal to the liquidator within 14 days of the receipt of the decision.

STEP – 5 Realization of Assets

The Liquidator sells the company’s assets, whether secured or unsecured, to generate maximum value. The proceeds from these sales are collected into the liquidation estate, which will be used to pay off creditors and cover liquidation costs.

STEP – 6 Distribution of Proceeds

The Proceeds from the sale of the liquidator assets shall be distributed in the order of Priority under Waterfall Arrangement. first, the costs of the insolvency resolution and liquidation; next, payments to secured creditors; then, workmen’s dues for up to 24 months; followed by government dues; then unsecured financial creditors; and any remaining funds are finally distributed to the shareholders.

STEP – 7 Dissolution

Once the liquidation process is complete, the liquidator shall submit an application to the NCLT for dissolution, NCLT shall pass an order of Dissolution and from the date of Order, the Company shall stand Dissolved.

 

Method	Governing Law	Advantages	Impact on Shareholders	Liability Exposure	Control & Continuity	Time / Complexity	When used
Transfer of Shares	Section 56, Companies Act, 2013	Quick exit, retains business continuity, minimal disruption	Shareholders exit ownership rights	NIL, once shares  aretransferred	Company continues normally under existing management	Low; simple process with ROC filing	Shareholder wants to exit without closing the company
Voluntary Liquidation	Section 59, IBC, 2016	Organized closure, orderly settlement of claims, avoids disputes	Shareholders receive residual funds after liabilities	Limited to company’s obligations	Management replaced by appointed liquidator; company operations cease	Medium; involves formal meetings, declarations, and liquidation process	Company purpose completed
Winding Up by Tribunal	Sections 270–365, Companies Act, 2013	Court-monitored, protects creditors, legal compliance	Shareholders may lose investment; residual distribution only after claims settled	Medium to high depending on legal findings	Management replaced by liquidator; operations cease	High; involves court process, petitions, and tribunal oversight	Fraud, non-compliance, or petition by shareholders/creditors/government
Striking Off the Business	Sections 248–252, Companies Act, 2013	Simple, fast, minimal formalities, avoids long liquidation	Liabilities to settle any claim that arise in future	Low if all liabilities cleared	Company ceases to exist; no continuity	Low; simple ROC process	Dormant or inactive company with no liabilities
Liquidation under IBC, 2016	Sections 33–54, IBC, 2016	Protects creditors, ensures fair settlement	Shareholders may not receive any funds if creditors’ claims exceed assets	High if personal guarantees exist	Company operations cease; liquidator fully in control	High; court and regulatory process involved	Insolvent company, CIRP failure, unable to continue operations

Conclusion

Exiting a business in India is a carefully regulated process that depends on the company’s financial health, strategic goals, and legal obligations. A proper exit ensures that the company’s operations are wound up or transferred in an orderly and transparent manner, minimizing risks for both the owners and creditors. It helps settle outstanding liabilities, protect the rights of employees and shareholders, and maintain compliance with regulatory authorities.

Planning the exit carefully also allows for a smooth transition of ownership or closure, reduces legal and financial complications, and ensures that the business concludes its operations in a responsible and fair way.

This is where Companies Next stands out. With end-to-full-service support, expert led guidance, and an in-depth knowledge of regulatory requirements, Companies Next will make your exit process simple, easy and compliant for you. We lead you through each step of the exit process (from your choice of exit method (strike-off, liquidation or transfer) until your final closure) to give you an easier exit process and save you time, money and unnecessary hassle.

Close Your Company Hassle-Free with CompaniesNext.

 

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