How to close the private limited company with 2 shareholders

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 January 2011 Two equal shareholders 50-50. A is sleeping partner, B is managing director, did forging signature on all resolutions, and ROC papers. B has single signatory in the bank, therefore misusing funds. A can also use his signature for bank operation but so far not using. What should A do to achieve shares of A back if A want to quit the company in this case ?

Jayashree S Iyer

Jayashree S Iyer (Expert)
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10 January 2011 It means B is having full control of the Company.

If A wants to come out, there are 2 options:

1) Find the provisions/restrictions contained in Articles Of Association with regard to transfer of shares.If no specific restriction, then find a buyer for these shares. Sell them and come out.
2) If the articles does not allow you to sell it to a third party or you are unable to find a buyer, then file a petition before Company Law Board alleging oppression and mismanagment u/s.397 and 398 of Companies Act, 1956 by B and let the dispute be settled by CLB.

Would like to have the views of other members too.

Message likes : 1 times

Querist : Anonymous

Querist : Anonymous (Querist)

10 January 2011 I forgot to say. Company is private limited with 2 share holders. And there is no article of Association signed before because both are founders.

Looking forward to have views of other members.

Thanks.

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Querist : Anonymous

Querist : Anonymous (Querist)

10 January 2011 Any more views ?

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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28 July 2024 To address the issues you're facing with the private limited company and the steps required to close it or resolve the disputes between the shareholders, here's a comprehensive approach:

### **1. Understanding the Situation**

- **Shareholders and Roles:**
- **A**: Sleeping partner with 50% shares.
- **B**: Managing Director with 50% shares and single signatory authority in the bank.

- **Issues:**
- **Forgery**: B has forged signatures on resolutions and ROC documents.
- **Misuse of Funds**: B is potentially misusing company funds.
- **Lack of Articles of Association**: No formal AOA exists.

### **2. Steps to Address the Situation**

#### **1. Resolving Shareholder Disputes and Recovering Shares**

- **Review Company Records:**
- Obtain and review all company records including board resolutions, financial statements, and bank statements to identify discrepancies.

- **Legal Action for Forgery:**
- **File a Complaint**: A should file a police complaint for forgery against B. Provide evidence of forged signatures and misuse of funds.
- **Seek Injunctive Relief**: Obtain a court order to prevent B from further misusing company funds.

- **Recovery of Shares:**
- **Negotiate a Settlement**: Attempt to resolve the issue through negotiation and reach an agreement on the transfer of shares or settlement.
- **Legal Counsel**: Engage a legal expert to draft and execute a formal agreement to transfer shares if an agreement is reached.

#### **2. Closure of the Company**

If A wishes to close the company, the process involves several steps:

- **Board Meeting and Resolution:**
- Call a board meeting (if possible) and pass a resolution to wind up the company. Ensure proper documentation of the decision.

- **Filing for Winding Up:**
- **Voluntary Winding Up**: If the company is solvent, a voluntary winding up can be initiated. File Form 149 with the Registrar of Companies (ROC) along with a declaration of solvency.
- **Resolution of Creditors**: If the company has creditors, a resolution of creditors is needed.

- **Appointment of Liquidator:**
- Appoint a liquidator to handle the winding-up process. The liquidator will be responsible for settling liabilities and distributing assets.

- **Final Accounts and ROC Filing:**
- Prepare final accounts and submit them to the ROC along with a statement of affairs and the liquidator’s report.
- File Form 66 (for winding up) and Form 21 (for dissolution) with the ROC.

- **Settlement of Liabilities:**
- Ensure all company liabilities are settled before dissolution.

- **Cancellation of Registrations:**
- Cancel any company registrations such as GST, PAN, and other statutory registrations.

#### **3. Preventive Measures for Future**

- **Draft Articles of Association (AOA):**
- For future companies, ensure that the AOA is drafted and signed. It will provide a framework for company operations and conflict resolution.

- **Bank Signatories:**
- Ensure that multiple signatories are required for important bank transactions to prevent misuse.

- **Regular Audits:**
- Conduct regular audits to monitor financial transactions and prevent misuse of funds.

### **4. Documentation and Legal Compliance**

- **Documentation:**
- Collect and maintain all relevant documents including board resolutions, financial records, police reports, and legal filings.

- **Legal Compliance:**
- Ensure that all legal requirements for winding up and resolution of disputes are met according to the Companies Act.

### **5. Consulting Legal Professionals**

Given the complexity of the situation, it’s advisable to consult with:

- **Corporate Lawyer:** For handling disputes, forgery cases, and legal actions.
- **Chartered Accountant:** For handling financial aspects of the company’s closure and tax implications.
- **Company Secretary:** For compliance with company law and ROC filings.

### **Conclusion**

**For A to Recover Shares and Close the Company:**

1. **Address Forgery and Misuse:** Take legal action against B for forgery and misuse of funds.
2. **Resolve Disputes:** Attempt to negotiate and reach a settlement for share recovery.
3. **Initiate Winding Up:** Follow the legal process for winding up the company if closure is the desired option.
4. **Seek Professional Advice:** Engage legal and financial experts to ensure proper handling of the situation.

Following these steps should help in managing the current issues and achieving the desired outcome effectively.