Winding Up Public Limited Company
A Public Limited Company, legally known as PLC, is a publicly held company. It is a limited company whose shares can be traded with the public. PLC can be listed or not listed in the stock exchanges. PLC requires a minimum of 3 Directors as a prerequisite.
A Public Limited Company may be closed either voluntarily by the shareholders or compulsorily by the judiciary.
Requirements for closing Public Limited Company
Voluntary closing of Private Limited Company:
This is possible if,
- Creditors’ Voluntary Liquidation – The Company and its shareholders chose to liquidate the Company because it can’t pay debts
- Members’ Voluntary Liquidation – There Company can pay its debts but the members want to close it
Compulsory closing of Private Limited Company:
This happens in the following scenarios,
- The Company is unable to pay its debts
- Tribunal orders the Company to be shut down or is of the opinion that the Company is equitable and must be shut down
- When the Company has not filed financial statements or annual return in the preceding five consecutive years
- The Company has acted against the sovereignty and integrity of the state and India, friendly relations with foreign states, public order, decency or morality
- If the Company has been conducted in fraudulent manners or is guilty of fraud or misconduct
Procedure for Public Limited Company Closure
The dissolution of a Public Limited Company consists of three main stages:
- Dissolution Resolution:
To dissolve a Company, at least 2/3rd of the shareholders must adopt the resolution. The management must submit an application to the Register of Companies along with resolution of dissolution, the minutes of the general meeting
The dissolution resolution and submission of application is followed by liquidation, in a series a steps.
- Appointment of liquidator is either members of management or a separate liquidator appointed by the judicial. The liquidator submits the application of dissolution to the Registrar.
- Publication of a notice regarding liquidation of Public Limited Company is sent out, specifying the creditors.
- Submit annual report and opening balance sheet to the Registrar upon liquidation.
- If the assets of the public limited company being liquidated are not sufficient to satisfy all of the requirements of the creditors, the liquidators must file a bankruptcy petition. If a creditor known to the public limited company has not presented a demand and the demand cannot be satisfied due to reasons independent of the public limited company, the funds belonging to the creditor shall be deposited in escrow if possible.
- Preparation of final balance sheets of Public Limited Company and distribution of remaining assets according to the plan prepared by the liquidators is the final step of liquidation. The assets may be distributed after six months have passed since the dissolution of the Public Limited Company was entered into the Commercial Register and the liquidation notice published and after two months have passed since the shareholders were notified of the presentation of the final balance sheet and asset distribution plan.
- Deletion from Commercial Register:
After the Public Limited Company has been liquidated as required, the company management board will have to submit an application to the Register for the deletion of the company from the Commercial Register. This can be done after a minimum of six months of the entry of the dissolution of the public limited company into the Register and providing notification thereof along with a final balance sheet and asset distribution plan to the application for deletion from the Register.
Liquidation of a Public Limited Company is a fairly time-consuming process that lasts at least six months. The activities of a dissolved Public Limited Company can be continued, or a merger, division or transformation of the Company may also be conducted. To do so, the liquidators must submit to the Commercial Register an application for continuing the company’s activities.