🏁 Introduction 

India is a dynamic and rapidly growing economy that has attracted thousands of foreign companies. However, changes in strategy, shifting markets, or internal restructuring may require a foreign company or its Indian subsidiary to wind up operations. Closing down a business entity in India involves regulatory compliance with Indian corporate, tax, and financial laws.

This guide walks you through the entire process to close a foreign company or subsidiary in India, covering both voluntary and regulatory mechanisms, and is tailored for corporate professionals, legal teams, and business owners.

📌 Understanding the Entity Structure

Before initiating the closure, it's important to identify what type of entity is being closed:

• 🔹 Wholly Owned Subsidiary (Private Limited Company)
• 🔹 Liaison Office (LO)
• 🔹 Branch Office (BO)
• 🔹 Project Office (PO)

Each entity type follows a different procedure for closure, governed by the Companies Act, 2013, FEMA, Income Tax Act, and Reserve Bank of India (RBI) guidelines.

✅ Pre-Closure Requirements

Before initiating the closure, ensure the following:

• 🔐 No active operations for the past 2 years
• 🧾 Clearance of all statutory dues (Income Tax, GST, PF, ESIC, etc.)
• 🧑‍🤝‍🧑 No pending legal disputes or court cases
• 🏦 Closure of all bank accounts
• 📊 Finalization and audit of financial statements
• 📤 Filing of all pending returns with RoC and tax authorities

🧾 1. Board & Shareholder Approvals

To begin the closure process of a subsidiary:

• 📄 Board Resolution: A resolution must be passed by the company’s Board of Directors to close operations.
• 📑 Shareholders’ Special Resolution: A special resolution (requiring 75% approval) must be passed in an Extra-Ordinary General Meeting (EGM).

These resolutions authorize directors to file necessary forms with the Ministry of Corporate Affairs (MCA) and manage all legal formalities.

📂 2. Filing for Closure (Strike Off Route – Fast Track Exit)

For a wholly owned subsidiary that is inactive:

📝 Apply via Form STK-2 to Registrar of Companies (RoC)

Documents Required:

• ✅ Board and shareholder resolutions
• ✅ Statement of accounts (not older than 30 days)
• ✅ Affidavits by directors (Form STK-4)
• ✅ Indemnity bond (Form STK-3)
• ✅ Certificate of no dues (from banks and regulatory departments)
• ✅ Closure letters from utility providers and vendors

⏳ Timeline:

The process typically takes 3 to 6 months post submission, subject to RoC review and public objection period.

📢 3. Public Notice by RoC

Once the application is accepted, the RoC issues a public notice in the Official Gazette, inviting objections from stakeholders within 30 days.

If no objections arise, the RoC proceeds to strike off the company from the register and issues a Certificate of Dissolution.

🔁 4. Voluntary Winding Up (If Liabilities Exist)

If the subsidiary has assets or outstanding liabilities, it must opt for voluntary liquidation under Section 59 of the Insolvency and Bankruptcy Code (IBC), 2016.

👣 Steps in Voluntary Liquidation:

1. 📋 Declaration of Solvency by Directors
2. 🗳️ Special resolution for winding up
3. 👨‍⚖️ Appointment of a licensed Insolvency Professional (as Liquidator)
4. 📢 Public announcement and invitation to creditors
5. 📊 Asset liquidation and debt settlement
6. 🧾 Submission of Final Report to NCLT
7. 🧑‍⚖️ Order from Tribunal to dissolve the company

⏳ Timeline:

This process can take 6 to 12 months, depending on complexity and liabilities.

🏢 5. Closure of Liaison, Branch, or Project Office

For non-corporate foreign entities (LO, BO, PO), closure is governed by FEMA guidelines and requires RBI and AD Category-I bank approvals.

📌 Steps to Close LO/BO/PO:

1. 🧾 Submit application to your Authorised Dealer (AD) Bank

2. ✅ Provide documents:

   • Auditor-certified statement of assets & liabilities
   • Confirmation of tax compliance (ITR, GST, TDS)
   • No dues certificate from landlord, utility providers
   • RBI registration number and LO/BO/PO approval copy
3. 🏦 Repatriate any remaining funds after meeting liabilities
4. 🔐 Close bank accounts
5. 📨 AD Bank forwards the closure report to RBI for final approval

📉 6. Tax and Financial Filings Post Closure

• 🧾 Final Income Tax Return (ITR) with audit report
• 📄 Filing of GSTR-10 for final GST return
• ❌ Cancellation of GST registration (via Form REG-16)
• 💼 Revoke TAN, PAN if applicable
• 📚 Maintain books for a minimum of 8 years post-closure as per compliance norms

📌 Documents Checklist

💡 Expert Tips

• ✅ Always appoint a local legal and compliance expert to coordinate with Indian authorities.
• ⌛ Don’t delay closure—non-compliance can attract penalties under the Companies Act, FEMA, and Income Tax Act.
• 🔍 Notify all stakeholders (vendors, employees, government agencies) in advance to ensure smooth winding down.
• 📌 If company has pending litigation, the RoC will not permit closure until resolved.

📌 Summary: Closure Routes

🏁 Conclusion

Closing a foreign company or subsidiary in India is a structured legal process. Whether your entity is a private limited company, liaison office, or branch office, compliance with Indian corporate and tax regulations is critical.

The best outcomes occur when the process is:

• 🔍 Strategically planned
• 📑 Legally compliant
• 👨‍⚖️ Professionally managed

Foreign businesses exiting India should work with experienced chartered accountants, company secretaries, and legal experts to ensure a smooth and penalty-free closure.

With proper execution, you not only avoid regulatory pitfalls but also preserve goodwill for any future re-entry into the Indian market.

Created & Posted by Nishu Sharma
Sales and Marketing Executive at TAXAJ

TAXAJ is a consortium of CA, CS, Advocates & Professionals from specific fields to provide you a One Stop Solution for all your Business, Financial, Taxation & Legal Matters under One Roof. Some of them are: Launch Your Start-Up Company/Business, Trademark & Brand Registration, Digital Marketing, E-Stamp Paper Online, Closure of Business, Legal Services, Payroll Services, etc. For any further queries related to this or anything else visit TAXAJ

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