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HOW IT WORKS?
There are two ways to proceed with cancellation of registration of a company.
a. Upon the application made by the company.
In this scenario, shareholders holding 75% of the company shares can file an application citing failure to start operations.
b. Upon the process initiated by OCR.
If a company fails to submit annual returns to OCR for three financial years, OCR can initiate company cancellation process.
The shareholders of a company may voluntarily liquidate the company either by deciding to voluntarily liquidate a company in the special general meeting or through the provisions of liquidation mentioned in memorandum of association or article of association or in the consensus agreement.
Under the following conditions, the company can be voluntarily liquidated:
- If a company is able to pay all of its debts or liabilities.
- Company is not under the insolvency proceedings, or is free from any application made for the review of insolvency of the company under the prevailing law on insolvency.
- Written declaration made by the directors of the company after due inquiry, stating that the company is able to pay off all of its debts and other liabilities and that the debts and liabilities to be paid on behalf of such company can be paid up or can be fully settled in any other process within one year from the date of the adoption of the resolution to liquidate the company.
- If the written declaration made by the directors was presented in the Special General Meeting (SGM), called to discuss on the liquidation matter or it was made at the time of SGM called to discuss matters on liquidating the company.
It is governed by Insolvency Act, 2063, which needs to be followed while making an attempt to dissolve the company. It is done against the will of a company for clear reasons only.
Any of the following person/entity can file an application at the court for the institution of insolvency proceedings:
- Insolvent company itself.
- Out of the total creditors of a company which has become insolvent, at least ten percent creditor or creditors who has or have lent money.
- Shareholder or Shareholders that has or have subscribed at least 5% of the total shares of shares, out of the total shareholders of a company.
- Debenture holder or debenture holders that has or have subscribed at least 5% of debentures, out of the total debenture holders of a company.
- Liquidator appointed to liquidate a company.
- A body authorized to administer and regulate the company that carries any specific type of business as per the Act.