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Running a company in profit is a prime motive of every promoter or founder of a company. However, every day is not same and circumstances may warrant a promoter or founder to take a tough decision with his/her heavy heart of closing down the company. As on date, there are two ways to close a company.

1. Strike off company

2. Winding up of company

There is difference between both above methods, but in this article we will discuss about striking of company.

What is meant by striking off of company name?

Striking off of company simply means closing of a defunct company, in fast way. It is simplest way to close a company.

Note : The companies are governed by the companies Act, 2013 and its section 248 governs the striking off of company.

What are ways to strike off a company?

A company can get strike off in two ways:-

A) By company itself as Voluntary Striking off

B) By Registrar of Companies

Note: Section 8 company cannot get strike off voluntary.           

Eligibility Criteria for Companies to opt for Strike Off:

The following companies are eligible for opting for strike off:

A company which has failed to commence its business within one year of its incorporation; or

A company which is not carrying on any business or operation for a period of 2 immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455.

Companies on whom Strike off under Section 248 is Not Applicable

The guidelines does not inter-alia cover

  • Listed companies;
  • Companies that have been delisted due to non-compliance of listing regulations or listing agreement or any other statutory laws;
  • Vanishing companies;
  • Companies where inspection or investigation is ordered and being carried out or actions on such order are yet to be taken up or were completed but prosecutions arising out of such inspection or investigation are pending in the Court;
  • Companies where notices have been issued by the Registrar or Inspector (under Section 234 of the Companies Act, 1956 (old Act) or section 206 or section 207 of the Act)and reply thereto is pending;
  • Companies against which any prosecution for an offence is pending in any court;
  • Companies whose application for compounding is pending;
  • Companies which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;
  • Companies having charges which are pending for satisfaction; and
  • Not-for-profit Companies registered under Section 25 of the Companies Act, 1956 or section 8 of the Act.

Checklist for Strike Off

The procedure is very simple and is done step wise:-

i) Authorize officer or any director of company to convene a Board Meeting

ii) Sending of Board Meeting Notice atleast seven (7) days prior to board meeting along with detailed agenda.

iii) Convene Board Meeting and passing of Board resolution.

iv) Sending of Annual General Meeting / Extra-Ordinary General Meeting as the case may be

v) Convene General meeting and passing of Special Resolution.

vi) Filing of MGT-14 along with required attachments.

vii) Filing of STK-2 along with required documents.

viii) Registrar of companies after finding that all the attachments are fine and all the conditions are fulfilled and it is just and equitable to strike off the company, will strike off the company after publishing a public notice.

What are the documents which are required to attach with the forms?

  • A company may file an APPLICATION in the Form STK-2 (shall be accompanied by certain prescribed documents) along with the fee of Five Thousand Rupees for removing the name of the company from the Register of Companies, after extinguishing all its liabilities.
  • The main ingredients for such an application are:
    • Application in form STK-2.
    • Government filing fees: INR 10,000/-
    • Copy of Board resolution authorizing the filing of this application.
    • A statement of accounts showing nil assets and liabilities of the Company which shall be not more than thirty days before the date of application and certified by a Chartered Accountant.
    • Shareholder’s approval by way of Special Resolution.
    • In the case of a company regulated by any other authority, approval of such authority shall also be required.
    • Indemnity bond [to be given individually or collectively by the director(s)] in Form No. STK-3;
    • Affidavit in Form No. STK-4.

How long it takes to strike of company name from the register of companies?

Once an application is made for striking off of company by filing E-form STK-2, the concerned Registrar of Companies (ROC) after verifying the documents will strike off the name of company and this procedure normally takes 3-4 month. However, if any objection is received from Registrar of Companies (ROC) this process might take extra time or even reject the application.

End note

Before 10th May, 2019, no such specific provision existed in Company law which required any company intending to apply for strike off its name from the register of companies to file overdue returns (Form AOC-4 or Form AOC-4 XBRL, as the case may be, and Form MGT-7) before filing striking off application. The Registrars, in some cases were accepting striking off application without requiring companies to file such overdue returns and in some cases, companies were asked to file overdue returns. But now, w.e.f May 10, 2019, MCA has made a provision applicable across India by which companies are mandatorily required to file overdue returns prior to filing striking off application. Further, MCA has increased the fees for filing striking off application by a company from INR 5,000 to INR 10,000. This again, will hamper small companies who are unable to continue business due to unavoidable circumstances. On one side, Government has lowered the incorporation fees to zero for small companies but on other side, fees for exit option has been doubled.

CS Deepa Sharma

Author is a associate member of the Institute of Company Secretaries of India (ICSI) and apart from that she holds LLB degree and Master in Commerce degree from Rajasthan University. She is having over 5 years of experience as a Practicing Company Secretary. She is well versed with all the matters related to Company Law and ROC matters, RERA , statutory reporting, Compliance Report and Corporate Governance. She is having good exposure in maintaining secretarial records as prescribed under Companies Act, 2013.

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