- Quick and Reliable
The closure of a Profit Non-Distributing Company is a specialized legal process governed by Chapter 19 of the Companies Act. Unlike commercial firms, the dissolution of these entities ensures that any remaining assets are redirected toward social or charitable objectives rather than being distributed among members.
₨ 50,000.00
Under Sections 166 and 167 of the Companies Act, 2063, a company not distributing profits is established for benevolent, scientific, or social utility purposes. Because these entities enjoy specific tax exemptions and are prohibited from paying dividends, their closure is strictly monitored by the Office of the Company Registrar (OCR). The primary focus of this dissolution is to ensure that the “non-profit” integrity of the organization is maintained even during its final exit.
Pursuant to Section 167(1)(i), the most critical legal constraint during the closure of a profit non-distributing company is the Prohibition of Asset Distribution. Upon liquidation, any assets remaining after settling all debts and liabilities cannot devolve upon its members or their close relatives. Instead, the law mandates that such surplus must be dealt with according to the company’s Articles of Association (AOA)—typically by transferring the remaining property to another similar non-profit entity or a government-approved social fund. A Special Resolution must be passed by the members to initiate this voluntary winding-up process.
Failure to comply with these “non-distributing” rules during closure can lead to the cancellation of registration by the OCR under Section 167(2). If the OCR finds that assets were improperly diverted, it has the authority to appoint its own liquidator and auditor to override the company’s internal proceedings. Furthermore, directors may face legal action if they fail to settle liabilities according to the Priority of Payment rules, which place employee dues and government taxes ahead of other claims.
