Closing a company, also known as liquidation, is the process of wrapping up a business. It involves ending all activities. Then, selling off assets. Finally, dividing the money among creditors and shareholders.
This usually occurs when a company is struggling financially or unable to pay its debts. It also happens when the owners choose to stop the business for different reasons.
Closing a company in Nepal follows the Company Act and the Insolvency Act.
8 Simple Steps to Close a Company
Closing a company in Nepal is a straightforward process. Follow these eight simple steps:
- Step 1: Get approval from the Board of Directors for voluntary liquidation. Call a special meeting of shareholders to approve the decision.
- Step 2: Appoint a licensed liquidator to oversee the process. Notify creditors of the voluntary liquidation and publish in newspapers.
- Step 3: File an application for voluntary liquidation with the Office of the Company Registrar.
- Step 4: Get tax clearance from Inland Revenue Department.
- Step 5: Settle outstanding debts and liabilities with available funds.
- Step 6: Distribute remaining assets among shareholders as per their entitlement.
- Step 7: After completing the liquidation process, the liquidator will send a final report to the Office of the Company Registrar.
- Step 8: The Office of the Company Registrar cancels the registration.
What is Voluntary Liquidation?
Voluntary liquidation is a legal way for a company to close down. Directors or shareholders can start this process if they want to shut it down.
The Company Act and the Insolvency Act outline the steps for voluntary liquidation. During this process, the company must follow legal procedures. They need to pay off creditors in the right order. After settling debts, any remaining assets are distributed among shareholders. The distribution is based on their ownership in the company.
What is Compulsory Liquidation?
Compulsory liquidation, also called involuntary liquidation. It is a legal process where a court or government authority orders the closure of a company. In Nepal, this is regulated by the Insolvency Act of 2063 (2007).
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