Company Shutdown Without Notice: Can I Claim Severance and Bonus in India?

I work for a software company with 20 employees, similar to a startup. Without any notice, the company announced that they are shutting down. My salary up to the last month has been paid without any dues. As per the contract, I should be given 2 months' notice, and the first-year bonus is pending. Am I entitled to severance pay for 2 months and the bonus?

Reason for the shutdown

Investors don't want to spend more money, and the business is not making a profit. The company doesn't have any assets other than computers and laptops. What are the steps, if any, to claim severance pay? Do I need to go to court and all that? Please respond as soon as possible.

Thanks

Lodge a complaint in the labor office of that area regarding non-payment of wages and bonuses. Include all individuals affected by the closure of the establishment.

Thank you.

Steps to Take When a Company Shuts Down

Though the company wants to get rid of all the employees, it is not easy to close down operations just like that. The filing of accounts and notice of closure to the MCA are to be done, if not already completed. You may lodge a formal complaint with the labor office locally and also request the company to pay all dues as per the employment terms. Check if all other employees are ready to make a representation to the Labor Department. The sooner you do this, the better your chances of getting the dues as much as possible.

Try to obtain the relieving letter so that it can be used for your future employment. Start with diplomacy followed by exploring other options. Look for better opportunities while addressing the issue simultaneously.

The company has not filed for insolvency or anything similar with the government. They just verbally informed us that they are closing the company due to financial reasons.

Some of us were provided with company laptops for work. Can we retain the laptops as collateral for payment in lieu of notice if they fail to provide severance pay? The company is requesting the return of the laptops in exchange for the experience letter.

Dear Samjohn, I am constrained to state that in a critical situation of serious doubts relating to the probable loss of employment due to the imminent closure of the establishment and closure compensation, the questioner should be really serious in drafting his questions.

Understanding the Term "Start-up Company"

What do you mean by "a software company with 20 employees like a start-up?" In the first place, "start-up company" is a very vague term, for it denotes a newly formed business with a particular momentum behind it based on perceived demand for its product or service. There cannot be any fixed parameter to define how long a start-up company would remain as such based on its poise towards profitability. For example, Facebook was without any profit during the first five years from its inception. Therefore, it is important to mention the age of the company as well as the range of the period of service completed by the employees there so far.

Potential Exit Strategy and Employee Compensation

The founders of the company may have their own hidden exit strategy to sell it later to a larger company with a sweeping market share and to ease the process, adopt the strategy of sending out the existing employees based on non-profitability and paucity of further investments. In such a situation of closure of the undertaking, the company has to pay you compensation as per Sec.25-FFF(1) of the Industrial Disputes Act, 1947, as if you were retrenched. Better let all the 20 employees jointly make a complaint to the local ALC or DLC immediately.