How Do I Permanently Close My Small Factory Due to Health Issues? Seeking Guidance

Dear Sir, I run a small factory with fewer than 20 employees; it is a partnership firm. I have some health issues and am not able to manage it. I am the managing partner, and the other partners are not willing to run the factory, so I need to know the procedures to be followed for closing the factory permanently.

Regards

Hi Joshi Ji, I work in Industrial Relations (IR), and as a part of my job, I have been involved in closures. The process may vary from state to state. Initially, we need to provide the closure form to the Factories and Boilers Department. Subsequently, we must notify the local corporation, municipal, or panchayat authorities (Professional Tax). Following that, we need to inform the Department of Labor and Employment, Electricity Board, Water Authority, Telephones, Postal authorities, the Local Police Station, and any other relevant government departments. This includes cases where specialized chemicals are utilized. I hope this information is helpful.

In addition to what has been stated by Deepak Vasudevan, I would like to share that since the factory has fewer than 50 employees, you need not take approval from the Labor department or even inform them of the closure. However, you can close down the unit after paying retrenchment compensation. This includes payment of all pending salaries, leave encashment, and compensation to all employees who have worked for at least 240 days in the last 12 months. The compensation is equal to 15 days' salary for each year of service to each employee. Your intention to close down the unit shall be communicated to the workers one month before such closure. Otherwise, you will have to pay one month's salary to each worker as notice pay.

Additionally, you have to pay gratuity to those who have worked for at least 5 years, and the amount payable shall be equal to 15 days' salary for each year of service.

Manufacturing units without using power and having fewer than 20 people are not considered factories, but they are classified as industries under the ID Act. The nature of ownership, whether it is a proprietorship, partnership, or a limited company, does not affect the applicability of the ID Act.